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Probability in Casinos Final

This document provides information about roulette probabilities and house edges. It discusses: 1. The basic rules and components of roulette, including the wheel, ball, and betting table. 2. How to calculate probabilities of different outcomes like colors, numbers, and combinations based on the number of possible results. 3. The different types of bets in roulette like straight bets, splits, streets, and their payout odds and probabilities of winning in European and American roulette. 4. How the house edge is created by the difference between the true odds of an event and the payout odds set by the casino, ensuring they make a profit over many bets. House edges are

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0% found this document useful (0 votes)
535 views36 pages

Probability in Casinos Final

This document provides information about roulette probabilities and house edges. It discusses: 1. The basic rules and components of roulette, including the wheel, ball, and betting table. 2. How to calculate probabilities of different outcomes like colors, numbers, and combinations based on the number of possible results. 3. The different types of bets in roulette like straight bets, splits, streets, and their payout odds and probabilities of winning in European and American roulette. 4. How the house edge is created by the difference between the true odds of an event and the payout odds set by the casino, ensuring they make a profit over many bets. House edges are

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Muskan Mishra
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Casino
• Casino gambling is a hugely popular activity
• The backbone of casino game mathematics is probability
1. Roulette Wheel
• Roulette is a wheel with 37 (European version) or 38 (American version) fields

• A little ball is spun on the wheel until it lands on one of the 37 (European) or 38 (American) fields

• The fields contain the numbers 0–36.

• In the American version, the zero exists twice. 18 of these fields without the zero are red and 18 are black, the zero
(European version) or the zeros (American version) are usually green

• The fields all have an equal chance to be drawn, players can bet on any combination of numbers, red or black, even
or odd, high (numbers 19–36) or low (1–18)
• Winning and losing over a certain number of spins on the roulette
wheel is a perfect example of a binomial distribution - the probability
of winning is fixed, the spins are independent, and you have a fixed
number of trials
Roulette Table
• Place where numbers are mentioned

• Players place bets on numbers which they think will come by


placing chips against it
European Roulette
Basic Probabilities and Conditional Probabilities
• In European Roulette, 37 fields may be hit
• These 37 possible results S = {0, 1, 2, ….35, 36} are our sample space
• We can count the numbers of elements in S and it is, therefore, a discrete sample space.
We can now calculate probabilities for subsets E of S, so-called events
• S: Sample Space
• E ⊆ S: Event
• Probabilities for such are calculated by dividing the number of elements in E by the
number of elements in S

P(E) = No. of elements in E/No. of elements in S = |E|/|S|


Understanding the concept with an example

• We will take example of some events, i.e possible outcomes and the elements (numbers) in
that event e.g:

• X = “Red” = {1, 3, 5, 7, 9, 12, 14, 16, 18, 19, 21, 23, 25, 27, 30, 32, 34, 36}
P(X) = no. of elements in X/ S = 18/37

• Y = “Not Zero” = {1, 2, 3,…35, 36}


Using the same formula,
P(Y)= 36/37

• Z = “Odd number” = {1, 3, 5, 7, …35}


P(Z)= 18/37 ( since 18 odd numbers are there)
Combining 2 situations (Joint Probability)

For understanding the probability of event R of getting an odd number which is red in colour:
Found out by the calculating the elements in this set i.e red and odd
By digram , it comes out to be
1, 3,5,7,9,19,21,23,27

P(R)= 9/37

We can use conditional probability to calculate any event that is dependent on other event
e.g P(X|Z ) = P(X∩Z)/P(Z)
= (9/37)/(18/37)
= 1/2
But what we actually do in placing a bet:
• We choose any one number
• If ball lands on that number, we win , else we loose
• So, the probability of getting that can be calculated by the formula

Probability of winning =
Ways to Win / (Ways to Win + Ways to Lose)

So if choose number 7, probability of winning =


getting a 7/(getting a seven) + (getting a number except seven)
= 1/(1 + 36)

= 2.7 % (European)
In American Roulette
• Each factor remains the same except another chance of getting a 00 is
also taken into consideration
• i.e if the earlier sample space was of 37 elements, it would be off 38
elements now due to one extra number
• 00 can also be used in placing bets
• All other general rules remain nearly same
NOTE : ODDS
 
• The rules that apply at casino tables are designed in
such a way so as to tilt the advantage in favour of the
house.
• Because of this, it is of extreme importance for
roulette players to learn how to calculate the odds of
winning with each type of bet.

• Some people falsely believe the terms “odds” and


“probability” can be used interchangeably when in
fact, they cannot, simply because they denote two
different notions. If you are unfamiliar with the term
“odds”, it denotes the ratio between the number of
ways to win and the number of ways to lose. Unlike
probability, odds are never expressed in terms of
percentages but are typically presented as pairs of
numbers.
Calculating the reward:
• PAYOUT
1. Roulette payouts are an important part of roulette strategy. They work like
this.
2. The odds are stated in the form of x to 1, which means you’ll win x dollars for
every dollar you’ve bet.
3. For example, the single number bet offers a payout of 35 to 1. If you win,
you’ll get your dollar back plus the $35 for the win.
Different types of bets in Roulette
• Usually, players do not always choose to bet over a single number
• Different bets can be placed on different types or combinations of
number (winning space)
Bet Type Winning Space Payouts American European
Roulette Odds Roulette Odds
Any single number (i.e., 8
Straight-up 35:1 2.60% 2.70%
or 15)
Split Any two numbers (i.e., 7 17:1 5.30% 5.40%
and 12)
Any two numbers which
Trio 11:1 - -
adjoin them
Any three numbers in a line
Street 11:1 7.90% 8.10%
(i.e., 21, 20, 19)
Corner (square) Four numbers in a square 8:1 10.50% 10.80%
layout (i.e., 13, 14, 16, 17)
Covers the following five
Five-Number 6:1 13.20% 13.50%
numbers: 00, 0, 1, 2, 3
Any six numbers that create
Double Street two lines (i.e., 1, 2, 3, 4, 5, 5:1 15.80% 16.20%
6)
Covering 1, 5, 9, 12, 14, 16,
Snake Bet 19, 23, 27, 30, 32 and 34 2:1 31.58% 32.43%
Five-number bet which
Basket comprises of 0, 00, 1, 2 and 6:1 13.16% -
3
One of the three rows of
Column numbers on the roulette 2:1 31.60% 32.40%
table (3-36), (2-35), (1-34)
The first dozen (1-12)
Dozen second dozen (13-24) or 2:1 31.60% 32.40%
third dozen (25-36)
Numbers with a color
Color 1:1 47.40% 48.60%
background
Even / Odd Any even numbers / Any 1:1 47.40% 48.60%
odd numbers
Any number from 1-18 /
Low / High 1:1 47.40% 48.60%
Any number from 19-36
House Edge Concept
• As far as casino games are concerned, there is always a disparity between
the mathematical probability of winning with your bets and the ratio these
bets are paid at.
• It is precisely this disparity between the true odds of winning and the casino
odds that gives the house advantage over players in the long run.

• For every game the casino offers, the payout odds on bets are established in
such a way so that the casino can generate profits on each wager you make.
• This house advantage is expressed in percentages which reflect the overall
return the casino can expect over time, or in other words, the average
percentage players will inevitably lose in the long term.
• To calculate the house edge in roulette, we multiply the difference between the
true odds against winning and the casino odds by the probability of winning.
• On a double-zero wheel, the odds against winning with a Straight Up bet are 37
to 1 but the house pays only 35 to 1 which results in a house edge of 5.26%.
• Difference between the odds against winning and the payout in American roulette
is equal to two units. Using the formula from above, we can calculate the house
edge like so:
(37/1 – 35/1) x 1/38 = 2/1 x 1/38 = 0.0526 x 100 = 5.26%
• The house edge in European roulette is significantly smaller because there is only
one zero pocket on the wheel so the calculation will run as follows:
(36/1 – 35/1) x 1/37 = 1/1 x 1/37 = 0.0270 x 100 = 2.70%

LOSSES OF PLAYER DUE TO HOUSE EDGE IS SIGNIFICANT ONLY IN LARGER BETS e.g
you loose 526 dollars on playing with 1000 dollars due to house edge.
European EU Roulette American Roulette American Roulette
Bet Payout
Roulette Odds House Edge Odds House Edge

Straight Up 35:1 2.70% 2.70% 2.63% 5.26%


Split 17:1 5.41% 2.70% 5.26% 5.26%
Street 11:1 8.11% 2.70% 7.89% 5.26%
Square 8:1 10.81% 2.70% 10.53% 5.26%
Basket 6:1 x x 13.16% 7.89%
Line 5:1 16.22% 2.70% 15.79% 5.26%
Columns 2:1 32.43% 2.70% 31.58% 5.26%
Dozens 2:1 32.43% 2.70% 31.58% 5.26%

Low or High 1:1 48.65% 2.70% 47.37% 5.26%

Even or Odd 1:1 48.65% 2.70% 47.37% 5.26%

Black or Red 1:1 48.65% 2.70% 47.37% 5.26%


EXPECTED VALUE
• It is essential to understand how good or bad a bet is. We talk about how good the bet is by saying that if you make the same bet many
times, how much will you expect to win (or lose) per bet on average.
• Random Variable
The net winnings on a roulette wager can be thought of as a discrete random variable. If we bet $1 on red and red occurs, then we win our
dollar back and another dollar. This results in net winnings of 1. If we bet $1 on red and green or black occurs, then we lose the dollar that
we bet. This results in net winnings of -1.
The random variable X defined as the net winnings from betting on red in roulette will take the value of 1 with probability 18/38 and will
take the value -1 with probability 20/38.

• Calculation of Expected Value


We use the above information with the formula for expected value. Since we have a discrete random variable X for net winnings, the
expected value of betting $1 on red in roulette is:

P(Red) x (Value of X for Red) + P(Not Red) x (Value of X for Not Red) = 18/38 x 1 + 20/38 x (-1) = -0.053.

• Interpretation
The expected value is very much a measurement of the center or average. It indicates what will happen in the long run every time that we
bet $1 on red.
While we might win several times in a row in the short term, in the long run we will lose over 5 cents on average each time that we play.
The presence of the 0 and 00 spaces are just enough to give the house a slight advantage. This advantage is so small that it can be difficult
• E.g expected value of the "Black" bet which pays even money

x P(x) xP(x)

100 9/19 900/19


Bet Payout Expected Value
-100 10/19 -1000/19 1 Number "Straight 35 to 1 -5.26
Up"

Total   -100/19  =  -5.26 2 Numbers "Split" or 17 to 1 -5.26


"0/00"
3 Numbers "Street" 11 to 1 -5.26
4 Numbers "Corner" 8 to 1 -5.26
5 Numbers "First
Five" 6 to 1 -7.89

6 Numbers "Line" 5 to 1 -5.26


12 Numbers
"Dozens" and 2 to 1 -5.26
"Columns"

18 Numbers
"Red/Black,"
Even Money -5.26
"High/Low" or
"Odd/Even"
• Getting the same number in a row

Number of Spins Ratio Percentage

1 1.06 to 1 48.6%
2 3.23 to 1 23.7%
3 7.69 to 1 11.5%
4 16.9 to 1 5.60%
5 35.7 to 1 2.73%
6 74.4 to 1 1.33%
7 154 to 1 0.65%
8 318 to 1 0.31%
9 654 to 1 0.15%
10 1,346 to 1 0.074%
15 49,423 to 1 0.0020%
20 1,813,778 to 1 0.000055%
STANDARD DEVIATION
• For the same bet in previous slide, using the standard deviation formula,

x P(x) xP(x) (x - (-5.26))2 P(x)(x - (-


5.26))2

100 9/19 900/19 11080 5248

-100 10/19 -1000/19 8976 4724

Total   -100/19  =    9972


-5.26
• The standard deviation is the square root of this number, that is the standard deviation is
•         s  =  100
• Use of this value:
Consider Betting on "Black" 2500 times. First calculate the square root of 2500
which is 50. Next divide the standard deviation for "Black" by this square root, that
is divide 100 by 50 to get 2. Now add and subtract this result from the expected
value:

-5.26 - 2 = -7.26

-5.26 + 2 = -3.26

The result is that if the game is played 2500 times then there is a 68% chance that
the player will lose an average of between $3.26 and $7.26.

It may seem like playing 2500 times will never happen; however, if you were to own
a casino, then 2500 bets is not so many. This is why the casino does not need to rely
on luck. Given enough wagers, the casino is practically guaranteed to win. The more
you play, the greater the chance you will end up behind.
Famous Roulette Stratergies
• With the Martingale Strategy, you double your stake, if you have lost the previous game. You continue to
double each time until you win. Once you win, you start the sequence again. The idea is that, if you double
every time, after a loss, you end up with a profit.

• Unfortunately, once you lose 8 (or more) consecutive times, you could end up in an awkward situation that
your bankroll has dried up. Besides, you could face limits imposed by casinos.

• The Reverse Martingale Strategy works in the exact opposite way. You double your stake if you have won the
previous game. If you have a winning streak, this strategy is very appealing.

• The Fibonacci Strategy is comparable to the Martingale Strategy, but the increments of increasing the next
stake (after a loss) are not as steep as the Martingale Strategy. It follows the series 1-2-3-5-8-13-21 etc. It is
less progressive and less risky than the Martingale Strategy.

• In the D’Alembert strategy, you increase your stake with 1 unit (say 1$) after a loss. After a win, the increment
decreases with 1 unit. The stakes become much higher in the case you have lost more times than you have
LOTTERY PROBABILITY
• 6/49 LOTTO
1. Numbers from 1-49 are there
2. Player chooses a combination of 6 distinct numbers
3. If numbers in lottery= numbers in ticket – JACKPOT IS HIT (numbers need not
be in same specific order)
the probability of winning the lottery = the number of winning lottery
numbers/the total number of possible lottery numbers
• An alternative method of calculating the odds is to note that the probability of
the first ball corresponding to one of the six chosen is 6/49; the probability of
the second ball corresponding to one of the remaining five chosen is 5/48; and
so on. This yields a final formula of

• The range of possible combinations for a given lottery can be referred to as the
"number space".
• "Coverage" is the percentage of a lottery's number space that is in play for a
given drawing.
When not all 6 numbers match
• For a score of n, describes the odds of selecting n winning numbers from the 6 winning
numbers. This means that there are 6 - n losing numbers, which are chosen from the 43
losing numbers in
• The total number of combinations giving that result is, as stated above, the first number
multiplied by the second. The expression is therefore

• GENERAL FORMULA -

N=number of balls in lottery, K =number of balls in a single ticket ,B =number of matching


balls for a winning ticket
Slot Machine

• The three major aspects here are-


• Payback Percentage
• House Edge
• Return to player
• House edge is the measure of how much the house expects to win . For casino games house edge is what matters in the
long run to make profits.
• For example if a slot machine has 5% house edge , it means you will lose 5 rs on every 100 rs in the long run.
• This is a long run average however in the short run results may vary which makes the game appealing.
• Payback percentage is the amount you get back on each bet for a house edge of 5% the payback percentage is 95%.
• This shows how much the player will keep and how much the house will keep in the long run.
• It is impossible to calculate slot machine probability without these two factors.
1. The probability of winning
2. The amount of money you’ll win (the payoff)
• Slot machines include their payouts as public but the probability of winning is unknown in most cases
• Example
• Let’s assume you have 1000 possible reel combinations. Let’s also assume that if you got each of those in order, from 1 to 1000, you’d
win 900 coins.
• The payback percentage for that game would be 90%.
• You’d put 1000 coins in, and you’d have 900 coins left after a statistically perfect sampling of 1000 spins.
• If you knew the payback percentage and house edge for a slot machine game, you could predict your theoretical cost of playing that
game per hour in the long run. You’d only need to multiply the numbers of bets you made per hour by the size of those bets. Then you’d
multiply that by the house edge to get your predicted loss.
• Most slots players make 600 spins per hour. Let’s assume you’re playing on a dollar machine and betting three coins on every spin, or $3
per spin. You’re putting $1,800 per hour into action.
• If the slot machine had a 90% payback percentage, you’d lose $180 per hour on that machine. You’d have $1,800 at the start of the
hour and $1,620 at the end of the hour — assuming you saw statistically predicted results.
• In the real world, though, where you’d be seeing short-term results, you’d see some hours where you won and some hours where you
lost. If you played long enough, the Law of Large Numbers would ensure that you’d eventually see the statistically predicted results.
• This is how the casinos make their money. In the short run, you’ll win some of the time. That will keep you playing.
Game of craps
• The following are the rules that apply to playing craps:
• Casinos decide which bets will be offered as well as the payouts for them.
• The players throw the dice in turns, and the one throwing them is called the ‘shooter’.
• Bets are placed on the appropriately marked sections of the table where the particular bet is displayed.
• Before throwing the dice the shooter needs to make a ‘Pass’ or ‘Don’t Pass’ line bet. At some craps tables
these bets may be called ‘Right’ and ‘Wrong’ or ‘Win’ and ‘Don’t Win’ bets.
• A craps game is played in rounds.
• For a round to start, the shooter needs to make a ‘come out’ roll. If the roll is two, three or twelve, bets
placed on Pass line are lost. If the roll is seven or eleven, they win.
• If the shooter’s come out roll is four, five, six, eight, nine or ten, then a ‘point’ is established to pass. In
order for the bets on Pass Line to succeed, the point must be rolled before a seven, and the round will
finish. If the point number is established before a seven, the bets lose and the dice is given to the next
shooter. Whenever the Pass line bets win the Don’t Pass line bets lose and the other way around.
• If twelve is rolled on the come out roll, the Don’t Pass Line bets are pushed, while the Pass Line bets lose.
Game of craps

Craps may look like a game where people are simply throwing a
pair of dice across the table. However, there are odds,
probabilities and house edges involved that dictate the chances
of winning any given bet

the most likely dice roll is a seven, which will occur on six
of the 36 possible combinations from the two dice. The
next two most likely are six and eight followed by five and
nine and so on, reducing in probability as you move further
away from seven lower and higher respectively.
• Natural: Rolling a total of 7 or 11 — automatically wins.
• Craps: Rolling a total of 2, 3, or 12 — automatically loses.
• Point: Rolling a 4, 5, 6, 8, 9, or 10 — establishes the point for
the next round of rolling.

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