Expected Value
Expected value (EV) is the average payoff you would expect from a decision under your probability estimate. It connects forecasts to action.
Definition
Expected value (EV) is the probability weighted average payoff of a decision. It connects probability forecasts to whether a bet, trade, or action is worth taking.
Simple intuition
If an action pays +1 when you are right and loses -1 when you are wrong, and you believe the event probability is p, then:
EV = p * (+1) + (1 - p) * (-1) = 2p - 1
EV is positive when p > 0.50.
Why it matters
Scoring rules measure forecasting accuracy. EV measures decision quality given payoffs. In prediction markets, you often compare your probability to the market’s implied probability to estimate EV or edge.
Related
EV is closely related to edge and to decision rules such as a decision threshold.