• Bronze
Joined: 01.03.2011
Hi,

Today I watched pzhon's video about calling allins and unfortunately I didn't clearly understand how to calculate risk premium.

First of all I have to calculate \$reward:\$risk ratio. Assuming situation:

CO: 3000
BTN: 1000
SB: 6000
BB: 3000

With blinds 150/300

If I call and win I increase my \$Eq from 26,5 to 36 so the reward is 9,5\$
If I call and loose I go from 26,5 to 0 so I am risking 26,5\$

The ratio reward/risk is 0,35. I get to this point and don't know what to do next.

According to ICM explorer I get risk premium ~25%.

Thanks for any help.
• 4 replies
• Bronze
Joined: 17.06.2010
It looks like you are assuming that the chip leader is pushing onto the big blind. You will get different results with other combinations.

The idea of the risk premium is useful because you can estimate it before you know the equities of folding, winning, and losing. If you estimate the risk premium, then calculate the chip odds, you add the two to get the equity you need.

To calculate the risk premium instead of estimating it, you calculate the equity you need for calling to break even in \$, and subtract the equity you need for calling to break even in chips. You need 70% ~ 25/36 equity against the chip leader for calling to break even in \$. Your numbers are a little off because you only risk the 25% from folding, not 26.5% from taking the blind back. You do not have the option to take the blind back. The reward is 11%, the difference between doubling up (36%) and folding (25%).

Again, in practice, what you want to do is remember that the second stack has a high risk premium against the chip leader on the bubble. With equal stacks on the bubble, the risk premium is about 15%. The second stack may have a risk premium of 20-35% against the chip leader on the bubble. You estimate the risk premium, hopefully getting something close to 25%, and add this to the 45% chip odds for a 10 bb small blind push to get about 70% equity needed. That makes it an unexploitable fold with AKs, a fold even if you put the chip leader on a random hand.
• Bronze
Joined: 08.10.2009
Well, pzhon u must have a huge head to keep all this stuff inside!
Thanks for your great explaination, btw
• Bronze
Joined: 01.03.2011
Originally posted by pzhon

The idea of the risk premium is useful because you can estimate it before you know the equities of folding, winning, and losing. If you estimate the risk premium, then calculate the chip odds, you add the two to get the equity you need.

To calculate the risk premium instead of estimating it, you calculate the equity you need for calling to break even in \$, and subtract the equity you need for calling to break even in chips. You need 70% ~ 25/36 equity against the chip leader for calling to break even in \$. Your numbers are a little off because you only risk the 25% from folding, not 26.5% from taking the blind back. You do not have the option to take the blind back. The reward is 11%, the difference between doubling up (36%) and folding (25%).
Thanks for your response pzhon. You say it's useful because I don't need to know eq of folding winning and losing, but in order to calculate sie equity to break even in \$ I need to know the eq \$ of folding and eq \$ of winning (in the example its 25/36 ~ 70%) so it's not easy to estimate it at sight. Still, probably something I don't understand Could you provide the calculations step by step?
• Bronze
Joined: 17.06.2010
You aren't expected to do the exact calculations at the table. To build your ability to estimate the risk premium, you perform the exact calculations on many examples, and then notice patterns. For example, you might notice that the risk premium is low when you cover the pusher by a lot, even when it is the bubble, or that the risk premium increases on the bubble when a player with a short stack has already folded. You might notice the risk premium is never negative, even if you have the chance to knock someone out.

My program ICM Explorer does the exact calculations, and computes the risk premium for you. This is the output for calling a small blind push with the stacks you give:

Fold: 2700 chips, 0.2524, SD: \$14.56
Win: 6000 chips, 0.3604
Lose: 0 chips, 0
Tie: 3000 chips, 0.265

Equity needed: 70.04%
Chip odds: 45%