Risk Premium Concept

    • lcerebral18
      lcerebral18
      Bronze
      Joined: 29.06.2013 Posts: 4
      Hi, unless there is something I'm missing but shouldn't Hero's risk premium vs Player1 be 5.24% rather than 3.9% as shown in the 'Chip Value (4): The Risk Premium Concept' article? This calculation is located towards the end of the article in "Correlation between stack sizes and risk premium" section.
  • 7 replies
    • VorpalF2F
      VorpalF2F
      Super Moderator
      Super Moderator
      Joined: 02.09.2010 Posts: 8,915
      Hi, lcerebral18...
      Welcome to the forums!

      I'll make sure the ninjas see this.

      Thanks!
      --VS
    • darkonebg
      darkonebg
      Headadmin
      Headadmin
      Joined: 17.01.2008 Posts: 9,508
      Hey there,

      Forwarded to the SnG guru's =)

      Best,
      Kamen
    • gaaish
      gaaish
      Bronze
      Joined: 23.02.2010 Posts: 1,258
      Hey Icerebral,

      How did you come up with your result? Please let me know how did you calculate it and in the meantime I'll double check the issue with me SNG team.

      Best :)
    • lcerebral18
      lcerebral18
      Bronze
      Joined: 29.06.2013 Posts: 4
      Thanks for getting back to me. The monetary value of stack was obtained with the use of an ICM Nash calculator and risk premium was calculated by:

      Method 1

      Equity needed for +cEV call (chip equity):
      4500 * %Equity - 2700 > 0
      Equity > 60%

      Equity needed for +$EV call:
      $50.00 * %Equity - $32.62 > 0
      Equity > 65.24%

      Risk-premium = 65.24% - 60% = 5.24%
      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
      But I'm confused here as we risk 1800chips against Player 1 not 2700chips and our monetary value of stack if:
      - Fold = $32.62
      - Call/Win = $50.00
      - Call/Lose = $12.33
      Therefore we risk $20.29($32.62-$12.33) to win $50.00.

      The calculation using what we risk would then be done as follows:

      Method 2

      Equity needed for +cEV call (chip equity):
      4500 * %Equity - 1800 > 0
      Equity > 40%

      Equity needed for +$EV call:
      $50.00 * %Equity - $20.29 > 0
      Equity > 40.58%

      Risk-premium = 40% - 40.58% = 0.58%

      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
      Method 1 works against Player 2 in the example as well as all other examples shown in the Chip Value articles which show Hero being left with 0 chips if he loses.
      The only example that shows Hero not being left with 0 chips does not seem to work with Method 1. Unless there is a mistake with the calculation or something I don't see.
    • gaaish
      gaaish
      Bronze
      Joined: 23.02.2010 Posts: 1,258
      Hi again,

      Your calculation is a bit skewed from the very beginning. Most of all, it assumes that losing the hand means busting from the game, whilst Hero is still alive even if he lost against player 1.

      That's why you should include this scenario (mainly: going all-in against player 1 and losing) both in chip equity and in risk premium calculations.

      For example, assuming your stack values are correct (I haven't checked them yet), equity needed for a +$EV call would be:

      $50.00 * %Equity - $32.62 + $12.33 * (100% - %Equity) > 0


      Such calculations are a bit complicated though, that's why it's far better to rely on special software :) . Of course it's great that you're trying to do this on your own in order to understand the concept - that's exactly what our lessons are about to achieve :) .

      When it comes to the programs, I can recommend you HoldemResourcesCalculator (HRC) and the ICMZer. If you want to be able to calculate the "pure" risk premium (so not only the results in terms of ranges), you can use the ICM Explorer. Most of these tools may be found in our "PokerTools" section.


      I hope it helps a bit :) .

      Best
    • lcerebral18
      lcerebral18
      Bronze
      Joined: 29.06.2013 Posts: 4
      I see what I've done now. Also doing the risk premium calculations this time, the result does match that of the article.
      +$EV = 53.86%
      +cEV = 50%
      Risk premium = ~3.9

      Thanks for your help.
    • darkonebg
      darkonebg
      Headadmin
      Headadmin
      Joined: 17.01.2008 Posts: 9,508
      Glad it's sorted guys! :s_cool: