St. Petersburg Paradox

Lesson 8 of 10 • 0 upvotes • 6:29mins

Rakesh Sud

This lesson is on Key Concepts in Finance-St. Petersburg Paradox. The St. Petersburg Paradox is based on a simple coin flip game with an infinite expected winnings. The paradox arises by the fact that no rational human would risk a large finite amount to play the game, even though the expected value implies that a rational person should risk any finite amount to play it.