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The risk note that the eprot

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Unformatted text preview: n the 40th toss, will the casino actually be able to pay you one trillion dollars? This is called credit risk. •  Suppose the original condiRons only apply to the first 30 tosses. If 30 n>30 then you only win $2 . •  Then the expected winnings are •  The same result is obtained by assuming that, beyond some very 30 large number ($2 in our example), it makes no difference to people what the winnings are- - - i.e., by assuming that the uRlity funcRon is perfectly flat for large winnings (G. Cramer, 1728.) Ilya Pollak...
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