Game Bet & Math Workbook

Game Bet and Math
A Course on the Mathematics of Gambling
delivered by
Dr Bob Crossman
Indeed, is there anyone, who with a

wager at stake can avoid the trap of:
• Trying to perceive patterns when

confronting randomness?
• Seeking purpose where there is

only process?
Kamongo by Homer Smith
Workbook
This workbook is intended to be used by participants in the actual conduct of

the courses General Casino Maths and Casino Maths at the Venetian Macau.
It contains some key facts together with blank spaces intended for doing
exercises and answering questions at the time. It is not essential to take other
detailed notes because participants will be given a comprehensive set of
tailored notes after attending the course.
Dr Bob Crossman : ph +61408866212 : email drbob@doctorbob.com.au
Game Bet & Math v5 Workbook Page 1 Dr Bob

Introduction
What do casinos do?
Why do they make money?
What information is needed to calculate the expected revenue from a punter

over a designated period past or present?
What information is needed to calculate the expected range of actual

revenue?
What properties are needed for each betting event?
What mathematical parameters are calculated from this information?
What mathematical model do we need?

The Theory of Probability
The birth of probability theory can be traced back to 1654 and rather fittingly
owes its inspiration to games of chance. The story goes that Antoine
Gombard, the Chevalier de Méré, variously described as a philosopher, a
gambler and a man of penetrating mind, approached mathematician Blaise
Pascal to solve some problems arising in gambling games.
In particular he wanted to compare:
• betting even money that one could throw at least one six in four throws
of a die ; with
• betting even money that one could throw at least one double six in 24
throws of two dice
The Theory of probability is a mathematical model that brings the superficial

lawlessness of random events under the domination of law, order and
regularity. It models the behaviour of random events.
What is a mathematical model?
Mathematical models occur in many contexts; e.g.
• Geometry
• Mechanics
• Weather
• Economics
• etc
A mathematical model must start with a set of assumptions or axioms upon

which mathematically consistent relationships between the variables may be
developed. The sorts of mathematical techniques and formalism used or
developed will be a consequence of the way that the variables depend on
each other.
The results or ‘laws’ predicted by mathematical models are in no sense

absolute. How well they describe the real world (and in particular their ability
to predict behaviour) will depend largely on how well the initial assumptions
and intuitive feel reflect the real world. The very existence and profitability of
the gambling industry is testimony to the strength of the Theory of Probability.

Schematically we may represent mathematical modelling by:
real world abstract mathematical

problem model
inductive
procedures
experiment mathematical
or modify methods and
observation computation
deductive
procedures
data prediction
The Modelling of probability
The basis for the model is the empirically observed phenomenon of

statistical regularity. Simply put, this is the observed property that random
events appear to exhibit a regular behaviour if a ‘sufficiently large’ number of
observations are made.
We now proceed formally to introduce various concepts, assumptions,

variables and notation that we will use to describe the behaviour of the
random events of interest to us.
First we define a
Random Experiment (RE)
This is an experiment where repeated trials of the experiment may be
performed under the same set of conditions such that:
1. The result of each trial of the experiment results in exactly one of a
number of identifiable outcomes. After a trial is performed, It must be
possible to say, which of the possible outcomes has occurred;
2. It is not possible to predict in advance the outcome of an individual
trial; and
3. The result of a single trial is independent of the result of previous
trials.

Example RE # 1: Perform one spin of a roulette wheel
• Does this random experiment satisfy condition 1?

• What are the identifiable outcomes?
• How do we denote them?
• Why does the casino display the result of previous spins?

Assigning a probability to each outcome
The next essential step in the model is the process of assigning a number to
each of the possible outcomes in the sample space of a random experiment.
This number could be denoted by
Pr(ei ) = pi
The number pi is called the probability of the outcome ei and is a measure

of the relative likelihood of outcome ei occurring as the result of a trial of the
random experiment.
The probability pi is chosen to satisfy:
1. 0 ≤ pi ≤ 1 and
n
2. ∑p
i =1
i = p1 + p2 + p3 ........ + pn = 1
In other words;
1. each outcome is assigned a number called its probability, which is a

number between 0 and 1.
2. The sum of the probabilities for all the outcomes in the sample space
is 1.
Notes:
The choice of 1 for the sum of the probabilities is purely one of convenience in
arithmetic. Any other choice would amount to a matter of scaling or
normalising.
n
The symbol ∑ p is just a shorthand notation, which represents the sum of the
i =1
i
n
n numbers; ∑p
i =1
i = p1 + p2 + p3 ........ + pn .
A probability of 0 corresponds to impossibility and a probability of 1 to

certainty
In general how do we assign probabilities to each outcome in the

sample space of outcomes associated with a Random Event?

For RE#1 how do we assign probabilities to each outcome?
The concept of an ‘event’
The next concept we introduce is that of an ‘event’.
Any subset of the set of possible outcomes can be used to define an event
associated with the outcome of a trial of a random experiment.
The event is said to occur if the outcome of the trial of the random experiment
is one of the outcomes in the subset that defines the event.
What are some events that could be associated with RE#1?

How do we assign probabilities to events?
The probability of an event is the sum of the probabilities of the outcomes that
comprise the event.
Assign probabilities to the events that you associated with RE#1
Clearly, if the outcomes are equally likely, then the probability of an event E
is just given by
Pr( E ) = number of outcomes in the event × probability of each event
or equivalently
number of outcomes in the event

Pr( E ) =
total number of outcomes in the sample space
Some Other Random Experiments
• RE#2 Toss two indistinguishable coins once (as in Dragon Phoenix)
• RE#3 Toss two distinguishable coins once
• RE#4 Toss two indistinguishable dice once (as in craps)
• RE#5 Toss two distinguishable dice
• RE#6 Select 5 cards without replacement from a standard deck of 52

cards (as in Poker)
• RE#7 Toss a die repeatedly until a 6 appears
• RE#8 Toss 3 dice (as in Sic Bo)

For each of these random experiments:
1. Choose a suitable notation and write down the sample space of

possible outcomes;
2. Consider whether or not the outcomes should be regarded as equally
likely;
3. Assign a probability to each outcome;
4. Think of some possible events to associate with the random
experiment; and
5. Assign probabilities to those events.
Discussion
RE#2
RE#3
RE#4

RE#5
RE#6
RE#7
RE#8

Permutations and Combinations
The number of “permutations of n things taken r at a time” is denoted by

the symbol n Pr or (n)r and is included in Excel as the function PERMUT(n ,r).
The permutation could also be referred to as an arrangement of n things
taken r at a time. The order of things is important.
n
Pr = (n − 0) × (n − 1) × (n − 2) × .......... × (n − (r − 1))

r terms
There are r terms each decreasing by one, commencing with n and

concluding with ( n − ( r − 1)) = ( n − r + 1) . For example
7
P3 = 7 × 6 × 5 = 420
8
P2 = 8 × 7 = 56
n
A convenient expression for Pr is given by
n n!
Pr =
( n − r )!
Where n ! is the symbol for n factorial (FACT( n ) in Excel)
n ! = n × ( n − 1) × ( n − 2) × ....... × 3 × 2 ×1

product of n integers
The number of “combinations of n things taken r at a time” is denoted by

n
the symbol nCr or   and is included in Excel as the function COMBIN(n ,r)
r
.
 n! 
n  
n Pr  (n − r )!  n!
Cr = = =
r! r! (n − r )!× r !
Returning to RE#6, the number of equally likely outcomes in the sample

space Ω 6 is given by
52 52! 52 × 51× 50 × 49 × 48
C5 = = = 2,598,960
( 52 − 5 )!5! 5 × 4 × 3 × 2 ×1

The Algebra of Events and Probabilities
Events can be used in various ways to form other events. The probabilities of
the resulting events follow some simple rules.
The ‘Complement’ of an event
The opposite to Event E is denoted E and is called “not E ” and sometimes

referred to as the “Complement of E ”. The event E occurs if and only if the
event E does not occur. It follows that
Pr ( E ) + Pr ( E ) = 1 .
Mutually Exclusive Events
Two events A and B are said to be mutually exclusive if it is impossible for

them both to occur at the same time. That is, the sets of outcomes that
represent each event have no outcomes in common. At each trial of the
experiment with which they are associated A may occur and B may occur but
they cannot both occur at the same trial. For mutually exclusive events,
Pr ( A or B occurs) = Pr ( A ∪ B ) = Pr ( A) + Pr ( B )
Here we have used the symbol A ∪ B , which comes from the algebra of sets,
to represent the event (A or B or possibly both A and B occurs). For mutually
exclusive events, it is not possible for “both A and B to occur”
If events A and B have some outcomes in common, then they are not
mutually exclusive and both can occur simultaneously on the same trial. The
corresponding expression for the probability is
Pr ( A or B occurs) = Pr ( A ∪ B ) = Pr ( A) + Pr ( B ) − Pr( A ∩ B )
where A ∩ B denotes the intersection of A and B.
For mutually exclusive events, Pr ( A ∩ B ) = 0 and the probability of at least one

of them occurring is the sum of their individual probabilities.
“The probabilities of mutually exclusive events can be added”

Independent events
Two events are said to be independent if the occurrence (or non-occurrence)

of one event is not affected by the occurrence (or non-occurrence) of the
other.
Two events that are associated with different trials of a random experiment
are necessarily independent.
For two independent events A and B, the probability that they both occur is
the product of their individual probabilities.
Pr ( A ∩ B ) = Pr ( A) × Pr ( B )
“The probabilities of independent events can be multiplied”
If two events are not independent the corresponding expression is given by
Pr ( A ∩ B ) = Pr ( A) × Pr ( B | A)
where Pr ( B | A) is the conditional probability of B occurring given that A has

occurred.
An example
We will illustrate the use of these rules in several of the examples that follow
in our treatment of House Edge for particular bets and games.
For now, we can revisit Pascal’s problem as posed by the Chevalier de Mere.
We are now in a position to be able to answer:
• What is the probability of throwing at least one six in four throws of a

die?
• What is the probability of throwing at least one double six in 24 throws

of two dice?

We need to introduce some more concepts and notation necessary to
facilitate the discussion and treatment of many of the situations of interest that
arise in the casino context.
Random Variables
We define a Random Variable as a “variable that takes a value depending on

the outcome of a random experiment (or an event associated with a RE)”.
The value will be a number. This number may be one of a discrete set of
possible numbers or it may lie anywhere within a continuous interval of
numbers.
For example:
RV1: let X be the number of heads that appear when 3 coins are tossed.
RV2: Let Y be the amount of money a punter has after betting 1 unit straight
up on the spin of a roulette wheel.
RV3: Let T be the number of times a punter wins, when he has 4 successive
bets on 1st dozen at roulette.
RV4: Let F be the number of times a punter wins, when he has 50 successive
bets on Black at roulette.
RV5: Let H be the height of the next person to walk into the room.
For any random variable we are interested initially in the answers to 2

questions:
Probability Distribution of a Random Variable

Question 1: What possible values can the variable take?
Question 2: With what probability does it take each of these values?
The answers to these two questions collectively describe the probability

distribution of the random variable.
We will initially focus on discrete Random Variables where the answer to the
first question is one of a discrete set of possible numbers.
We need a notation to represent and display the answers to the two

questions above.

X
Value x1 x2 x3 … xi … xn
Probability p1 p2 p3 … pi … … pn
We might label the values x1, x2, x3, x4, ........xn denote the associated probabilities
by p1, p2, p3, p4, ........ pn and display them in tabular form.
For example with RV1 above, the answers to the two questions could be
displayed as:
X
Value xi 0 1 2 3
1 3 3 1
Probability pi 8 8 8 8
And, if required, be represented graphically by
Distribution Parameters
We introduce two parameters associated with the probability distribution of a

discrete random variable. These parameters are numbers that are obtained
by combining the various values xi and probabilities pi in a particular way.
They are measures of two important properties of the Random Variable.
The Mean or Expected Value
The mean or Expected value of the distribution of X is defined by
µ = E ( X ) = p1 × x1 + p2 × x2 + p3 × x3 + ...... + pn × xn
in words, multiply the corresponding values and probabilities and add them
up. The mean as defined is a measure of the centre of the distribution.
n
Using summation notation it can be written in a shorthand form: µ = ∑ pi xi
i =1

The Variance
The variance of the distribution of X is defined by
σ 2 = Var ( X ) = E (( X − µ ) 2 )
= p1 × ( x1 − µ )2 + p2 × ( x2 − µ )2 + ...... + pn × ( xn − µ ) 2
In words, for each value:
• take the distance that the value is from the centre (the mean);
• square it to treat values on either side of the mean in the same way;
• multiply by the corresponding probability; and
• add them up.
This parameter is designed to be a measure of the spread of the

distribution about the mean.
The above definition emphasises the interpretation of the parameter; but

computationally an equivalent expression is sometimes used:
σ 2 = ( p1 x12 + p2 x2 2 + ..... + pn xn 2 ) − µ 2
Using summation notation this can be written in the shorthand form:
n
σ 2 = ∑ pi xi 2 − µ 2
i =1
The use and interpretation of these parameters will become clearer as we use
them for various distributions of interest.
From the variance, we obtain a parameter that has the same dimensions as
the mean
The standard deviation σ is the positive square root of the Variance
σ = σ2
Consider these parameters for the distributions of RV1 above
RV1
1 3 3 1 3
µ = × 0 + ×1 + × 2 + × 3 =
8 8 8 8 2

1 3 3 1 3 3
σ 2 = × 02 + ×12 + × 2 2 + × 32 − ( ) 2 =
8 8 8 8 2 4
3 3
σ= =
4 2
Create the corresponding tables and graphs for the Random Variables RV2
and RV3 above. Work out their mean and standard deviation.
RV2: Let Y be the amount of money a punter has after betting 1 unit straight
up on the spin of a roulette wheel.
RV3: Let T be the number of times a punter wins, when he has 4 successive
bets on 1st dozen at roulette.

Think about doing the same thing for RV4 and RV5 .
RV4: Let F be the number of times a punter wins, when he has 50 successive
bets on Black at roulette.
Fifty successive bets on Black at Roulette
Fifty Bets on Black

0.12
0.1
0.08
probability
0.06
0.04
0.02
0
15
25
35
successes
Note that the probabilities for all values between 0 and 50 are non-zero, but
some are too small to register on the graph.
RV5: Let H be the height of the next person to walk into the room.
In what ways is RV5 fundamentally different from the other 4 examples

above?
What values does H take?
With what probabilities?
Can we represent the distribution graphically?

Normal - mean 175 - sd 8
0.06
0.05
prob density
0.04
0.03
0.02
0.01
0
151
175
183
191
150
159
167
199
height
The Binomial Distribution
RV3 and RV4 above are particular examples of the discrete random variable
known as the Binomial Distribution.
Let B be the number of successes in n independent trials of a random

experiment, where the probability of success on any one trial is p.
Then the probability of getting exactly j successes (and n-j failures) is given by
n n− j
Pr ( B = j ) =  j p j × (1 − p )
×

prob of

prob of
number of sequences j successes n-j failures
with j successes
n n− j
Pr ( B = j ) =   p j (1 − p )
 j
and the mean and standard deviation can be shown to be
µ = np and σ = np (1 − p ) .
Notes:
1. The Binomial Distribution describes sampling with replacement and

can be used to model a number of useful applications.
2. The Binomial distribution describes exactly the distribution of a

sequence of winning bets as illustrated above. For large values of n,
probabilities for many of the possible numbers of successes are very
small.

3. As illustrated by RV4 above, for large values of n, the Binomial
Distribution can be approximated by the continuous Random
Variable known as the Normal (or Gaussian) Distribution. The closer
the value of the mean µ = np is to ½, the more rapidly the shape of the
Binomial Distribution tends to that of the Normal Distribution.
4. The exact probabilities for the Binomial Distribution can be obtained in

Excel by using the function BINOMDIST(j,n,p,FALSE)
The Normal Distribution
is an example of a Continuous Random Variable, which can take any value

in a specified continuous range rather than one of a number of discrete
possible values. (The values taken will in general be limited only by the
accuracy of the measuring process).
It is not possible to represent the distribution of a continuous random variable

by using a table of values and probabilities as we did with discrete random
variables. Instead we represent probabilities by areas under a curve.
The area under the curve between two points represents the probability that
the variable takes a value between those two points.
The total area under the curve is equal to 1.
Standard Normal Distribution
-5 -4 -3 -2 -1 0 1 2 3 4 5
standard deviations
The Standard Normal Variable with mean µ = 0 and standard deviation σ = 1 is

illustrated above.

Normal - mean 175 - sd 8
0.06
0.05
prob density
0.04
0.03
0.02
0.01
151
175
183
191
150
159
167
199
height
Above is the Normal Variable with mean µ = 175 and standard deviation σ = 8 .
The variable above could, for example, represent the distribution of heights of
people.
The shape and centre of a normal variable is determined completely by

specifying its mean µ and standard deviation σ .
Areas under any Normal curve N ( µ , σ ) can be related to areas under the
standard Normal variable N (0,1) by shifting and scaling. We need to ask the
question “How many standard deviations is the point to the right or left of
the mean?”
For example, the area under the second curve between 175 and 183 is equal
to the area under the standard Normal curve between 0 and 1, and the area
between 171 and 175 equates to the area between –0.5 and 0.
In Excel the functions of use are NORMDIST ( x, µ , σ ) , which gives

p = Pr ( N < x) , the area under the curve to the left of x.
NORMINV ( p, µ , σ ) gives the value of x such that Pr ( N < x) = p .
Some particular probabilities of interest are given by
One Standard Deviation
68.3%
-5 -4 -3 -2 -1 0 1 2 3 4 5
standard deviations
68.3% of values will be within 1 standard deviation of the mean.

Two Standard Deviations
95.5%
-5 -4 -3 -2 -1 0 1 2 3 4 5
standard deviations
95.5% of values will be within 2 standard deviations of the mean.
Calculating the House Edge and Standard Deviation for typical casino
bets
The events on which punters are able to wager can be easily divided into 2
categories:
• Single Dividend bets

• Multiple Dividend bets
Each can be described as a simple discrete Random Variable and the House
Edge and Standard Deviation readily obtained from the probabilities and
Dividends associated with the wager.
RTP, House Edge and Standard Deviation for a single Dividend wager
We have effectively already done this in the example RV2 above.
Let RTP be the amount of money a punter has after outlaying 1 unit on the
result of an event for which his chance of success is p and the dividend
received, if successful, is D.
Note that D includes the original stake of 1 unit which is returned to the punter
if the wager is successful.
RTP is a simple discrete Random Variable which takes one of two values
RTP
Value D 0
Probability p 1-p
The Expected value of RTP is given by
µ = E ( RTP ) = p × D + (1 − p ) × 0 = pD

This is the mean or average value of RTP. If the sequence of results were
recorded for a number of bets, say D, D, 0, 0, D...... , and the average result
calculated, this average value would tend to pD over a sufficiently large
number of trials.
The House Edge associated with this bet is given by
House Edge = 1 − µ = 1 − pD
The Variance for the bet is given by
σ 2 = p × D 2 + (1 − p) × 02 − ( pD) 2
= D 2 p (1 − p )
so σ = D p (1 − p )
RTP = µ = pD
σ = D p (1 − p )
House Edge = 1 − pD
Notes:
1. The Standard Deviation for the House Edge is exactly the same as that
for the RTP but it is simpler algebraically to work it out for the RTP
2. The Dividend D = Odds + 1 where the wager is described as paying odds
of Odds to 1
3. It is usually algebraically simpler to work with the Dividend rather than
the Odds
4. For a fair bet the House Edge =0, and the expected value of RTP is 1
1
5. This occurs if D =
p
6. Another advantage of working with Dividends rather than Odds is that
the Dividend for a successful parlay of two bets with individual
Dividends D1 and D2 is simply the product D = D1 D2 .

RTP, House Edge and Standard Deviation for a multiple Dividend wager
Here the punter receives one of a number n of possible Dividends depending

on the outcome of the event on which he is wagering. If we again let RTP be
the random variable which is the amount of money returned to the punter after
the trial, then the probability distribution of RTP can be described by
RTP
Value D1 D2 ..... Dn 0
Probability p1 p2 ..... pn 1 − p1 − p2 ... − pn
The Expected value of RTP is given by
µ = E ( RTP) = p1 × D1 + p2 × D2 + ...... + pn × Dn + (1 − p1 − p2 ... − pn ) × 0

n
= p1 D1 + p2 D2 + .... + pn Dn = ∑ pi Di
i =1
n n
The Variance is given by σ 2 = ∑ pi Di 2 − (∑ pi Di )2
i =1 i =1
n
RTP = µ = ∑ pi Di
i =1
n n
σ= ∑pDi =1
i i
2
− (∑ pi Di ) 2
i =1
n
House Edge =1 − ∑ pi Di
i =1
We Illustrate using some of the commonly available wagers available in

games of interest

Roulette
Work out House Edge and Standard Deviation for a bet of one unit on Straight
Up
Work out House Edge and Standard Deviation for a bet of one unit on Black
Are there any multiple Dividend bets offered at Roulette?

Work out the House Edge and Standard Deviation for a bet on “orphans”
where “orphans” is a five piece wager: 1, 6/9, 14/17, 17/20 and 31/34.
What is the difference between a punter who places 5 individual straight up

bets on 5 successive spins compared to one who places 5 straight up bets on
the one spin?
Roulette
Bet St Up Split Street Corner 6 Line Col Black

p 1 2 3 4 6 12 18
37 37 37 37 37 37 37
D 36 18 12 9 6 3 2
µ 0.973 0.973 0.973 0.973 0.973 0.973 0.973
σ 5.838 4.070 3.276 2.795 2.212 1.404 0.999
House
2.702%
2.702%
2.702%
2.702%
2.702%
2.702%
2.702%
Edge
Note that the dividends for Roulette are such that each of the commonly
36
available bets has the same expectation ( RTP = ) and hence the same
37
1 ) The important way in which the bets differ
house edge( Edge = = 2.702%
37
is in their volatility, and the standard deviation provides a way of measuring
this, and of comparing the different bets.

Two Up (Dragon Phoenix)
The spinner throws two coins together
• "Dragon" means the two coins coming to rest on the floor of the ring
with the Dragon side uppermost on each;
• "Phoenix" means the two coins coming to rest on the floor of the ring
with the Phoenix side uppermost on each; and
• "Odds" means the two coins laying on the floor of the ring with one coin
Dragon side uppermost and the other coin Phoenix side uppermost;
If a player bets on the outcome “Dragon”, he wins if a Dragon appears before

a Phoenix unless five consecutive odds are thrown in the process, in which
case he loses.
What is the probability that the bet is successful?
If the Odds paid are 1 to 1, what is the House Edge and Standard Deviation?
A spinner wagering on Dragon wins if there are three successive dragon

pays. If successful, he is paid odds of 7.5 to 1. What is his probability of
success, the House Edge and the Standard Deviation?
A player betting on 5 consecutive odds is paid at 25 to 1. Work out the House

Edge and Standard Deviation for this bet.

Sic Bo
What is the probability of a total of 5 on a tumble of the 3 dice at Sic Bo?
A winning bet on a total of 5 is paid at odds of 18 to 1 at the Venetian. What

is the House Edge and standard deviation?
At MBS the same bet is paid at Odds of 31 to 1. What is the House Edge and
Standard Deviation there?
Work out the House Edge for a winning total of 13 at Odds of 8 to 1.

A single die wager pays
• Odds of 1 to 1 if the number chosen appears on exactly one die;

• Odds of 2 to 1 if the number chosen appears on exactly 2 of the 3 dice;
• Odds of 3 to 1 if the number chosen appears on all three dice.
This is an example of a multiple Dividend Bet. Work out the House Edge and
Standard Deviation.
(Note that in the same bet at MBS, the odds for all three dice are 12 to 1
instead of 3 to 1)
At the Venetian, the wording on the layout for a total of 5 or 16 reads
• “1 wins 18”
At MBS, the wording on the layout reads
• “1 pays 31”
Which is the better nomenclature?
What sort of pattern bets do punters commonly place on the Sic Bo layout?

Caribbean Progressive Jackpot Side-bet
13.1. Where a player's hand qualifies for a progressive jackpot payout, the
amount of the payout shall be as follows:
13.1.1. Royal Flush 100% of the jackpot

13.1.2. Straight Flush 10% of the jackpot
13.1.3. Four of a kind $5,000 bonus payout
13.1.4. Full House $1,500 bonus payout
13.1.5. Flush $1,000 bonus payout
12.3. The amount required to make a wager on the progressive jackpot shall
be displayed on a sign at the table;
12.6. The casino operator shall determine the rate of increment to the prize
pool(s) and may elect to retain a portion of each wager on the progressive
jackpot as gaming revenue;
Work out the probabilities of the 5 outcomes above.
From the player’s perspective, what is the House Edge and Standard
Deviation for this side-bet if the price of the side-bet is $25?
For what value of the jackpot pool is the RTP equal to 100%?
Referring to clause 12.6 above; If the initial seed is $250,000 and 17% is the
rate of increment to the prize pool(s), what is the “portion of each wager on
the progressive jackpot as gaming revenue” that the casino elects to retain?

Classification of Poker Hands
A Standard Deck comprises 4 suits: Spades ( ♠ ), Clubs ( ♣ ), Hearts ( ♥ )

and Diamonds ( ♦ ). Each suit contains 13 ranks with hierarchy A, K, Q, J, T,
9, 8, 7, 6, 5, 4, 3, 2.
Here A represents an Ace, K a king, Q a Queen, J a Jack and T a 10 card.
Note that for purposes of a straight (5 cards of consecutive rank), the Ace can
be regarded as above a King or below a 2 so that AKQJT and 5432A are both
regarded as straights. There are thus 10 different possible straights.
There is no hierarchy of suits.
Classification of Hands
Description Definition Example
Royal Flush AKQJT of the same suit A♦K♦Q♦J ♦T ♦
Straight Flush 5 cards of consecutive rank J ♥T ♥9♥8♥7♥
and of the same suit but not
a Royal Flush
Four of a Kind 4 cards alike of one rank and
1 of another
7♥7♠7♦7♣Κ♣
(Quads)
Full House 3 cards alike of one rank and 7♥7♠7♣Κ♣Κ♦
2 alike of another
Flush 5 cards alike of one suit but A♥Τ♥7♥6♥2♥
not of consecutive ranks
Straight 5 cards of consecutive rank
but not all of the same suit
T♦9♥8♠7♥6♥
Triplets 3 cards alike of 1 rank and 2 7♥7♦7♣Κ♣9♦
others each of different rank
Two Pairs 2 cards alike of 1 rank, 2 alike 7♥7♠Κ♥Κ♣9♦
of another and 1 of a different
rank
One Pair 2 cards alike of 1 rank and 3
others each of different rank
7♥7♠Κ♥Τ♣9♦
No Pair None of the above
7♥8♠Κ♥Τ♣9♦

Probabilities of Poker Hands
Outcome Formula Number Probability
Royal Flush  4
1×   4 0.0002%
1
Straight  4
Flush 9×  36 0.0014%
1
Four of a  13   12   4   4 
Kind  1 × 1 × 3× 2 624 0.0240%
       
Full House  13   12   4   4 
 1 × 1 × 3× 2 3,744 0.1441%
       
Flush  13   4
(   − 10) ×   5,108 0.1965%
5 1
Straight 4
5
10 × (   − 4) 10,200 0.3925%
1
Triplets  13   12   4   4   4 
 1 × 2 × 3× 1×1 54,912 2.1128%
         
Two Pairs  13   11  4   4   4 
 2 × 1 × 2× 2× 1 123,552 4.7539%
         
One Pair  13   12   4   4   4   4 
 1 × 3 × 2×1 × 1 × 1 1,098,240 42.2569%
           
No Pair  13   4
5
(   − 10) × (  − 4) 1,302,540 50.1177%

5 1
Total  52 
5 2,598,960 100%
 
n
Note that   is the number of combinations of n things taken r at a time.
r

Slot Machines
SLOT MACHINE #2
payout hits
0 879816
2 300
5 300
10 300
25 400
40 400
50 500
100 800
150 600
200 400
300 400
500 300
1000 200
2000 10
3000 6
5000 3
10000 1
cycle 884736
How do we work out the RTP and the standard deviation for the slot machine
whose payout table is given above?.
How do we answer questions like “What is the chance that the major prize
goes off more than twice in the next 2 million spins?

Baccarat
If either or both of the Player and Banker initial 2 cards have a point total of 8
or 9, no further cards are drawn
TABLE ONE: PLAYER’S HAND

A player having a point count
of: -
• 0-1-2-3-4-5 Draws a card
• 6-7 Stands
• 8-9 Has a natural and cannot draw
TABLE TWO: BANKER’S HAND
After the Player has acted, the Banker acts according to the table
Banker's Third Card Drawn by Player's Hand

Hand None 0 1 2 3 4 5 6 7 8 9
0 D D D D D D D D D D D
3 D D D D D D D D D S D
4 D S S D D D D D D S D
5 D S S S S D D D D S S
6 S S S S S S S D D S S
7 S S S S S S S S S S S
Each completed coup will use the next 4, 5 or 6 cards in sequence from the
shoe. To evaluate the distribution of the final Banker and Player hands we
need to systematically consider each of the 1,000,000 different (with respect
to point value) 6 card sequences that can be drawn without replacement from
a complete shoe. We could in practice, reduce this to 250,000 sequences
because the play of the coup treats the first and third cards (player initial
hand) collectively and also the second and fourth cards (banker initial hand)
together.
We illustrate the treatment of a typical sequence, 001378, drawn without

replacement from an 8 deck shoe.
For this sequence, the Player total (first and third cards) is 0+1 = 1 and the
player draws a card (the 5th card) which is the 7.
The Banker initial total (2nd and 4th cards) is 0 + 3 = 3 and after the Player
hand has drawn the 7, the Banker draws the 6th card, viz the 8.

The final Player hand has a point total of 1 +7 = 8 and the final Banker hand
has point value (8+3) modulo 10 which equals 1.
This sequence thus results in a win for the Player hand with a final total of 8
compared to the final Banker total of 1.
We next need to work out the probability of the sequence occurring
The probability of the sequence occurring is
128 127 32 32 32 32
× × × × × = 0.00034102% .
416 415 414 413 412 411
We systematically (with the aid of a computer) calculate the probability of

each possible sequence and classify them according to whether the sequence
resulted in a win for Banker, win for Player or a Tie. The results are displayed
as
banker bet wins 573,063,141,609,472

player bet wins 557,629,570,648,064
tie bet wins 118,906,856,618,304
total sequences 1,249,599,568,875,840
The figure described as total sequences is a convenient denominator :
416 × 415 × 414 × 413 × 412 × 411

1, 249,599,568,875,840 =
4
The probability that a dealt hand of baccarat results in a win for a bet on
banker is
573,063,141,609,472
= 45.8597%
1,249,599,568,875,840
The absolute probabilities of success (rounded to 4 decimal places) for each

of the three bet types are given by:
absolute probabilities
probability banker bet wins 45.8597%
probability player bet wins 44.6247%
probability tie bet wins 9.5156%
total 100%

When the result of a hand of baccarat is a “tie”, any bets placed on “banker”
or “player” are regarded as void and returned to the player. For some
calculations (see subsequent discussion) it will be appropriate to use relative
probabilities. In this case we only consider the outcomes which result in a win
for “banker” or “player” bets. We will describe these as resolved hands.
banker bet wins 573,063,141,609,472
player bet wins 557,629,570,648,064
player or banker bet wins 1,130,692,712,257,536
The probability that a resolved hand of baccarat results in a win for a bet on
banker is
573,063,141,609,472
= 50.6825%
130,692,712,257,536
The relative probabilities of success for banker and player bets are given by
relative probabilities
probability banker bet wins 50.6825%
probability player bet wins 49.3175%
total 100%
When considering bets on “tie” bets, one uses absolute probabilities since the
bet is always resolved.
House Edge and Standard Deviation
The House Edge and Standard Deviation for these bets can be determined
from the probability of success ( p ) and the Dividend D (Odds+1) paid for a
successful bet of 1 unit.
absolute bet parameters
probability Dividend House Standard
Edge Deviation
p D µ σ
banker 45.8597% 1.95 1.0579% 0.9274
player 44.6247% 2 1.2351% 0.9512
tie 9.5156% 9 14.3596% 2.6409
relative bet parameters

p D µ σ
banker 50.6825% 1.95 1.1692% 0.9749
player 49.3175% 2 1.3650% 0.9999

Blackjack
The determination of the expectation and standard deviation for Blackjack is

more involved and depends on a number of factors including the rules in
force, the number of decks and the strategy and betting decisions made by
the player. One needs to again systematically enumerate the possible
sequences of cards drawn without replacement leading to all the possible
outcomes. Computers are used to facilitate the counting involved.
The RTP depends on the strategy adopted by the player given his two starting
cards and the dealer first card. All the possible cards or sequence of cards
that the player can draw and the subsequent possible resolution of the
dealer’s hand, given the cards drawn by the player, are considered for each of
the possible strategy decisions available to the player.
The strategy decision which results in the largest return to player given his
two starting cards and the dealer’s first card is deemed to be the correct basic
strategy.
The overall RTP is then calculated and conventionally expressed as a

percentage of the player’s original bet without allowing for the extra amount
wagered in doubling and splitting or the amount returned from ties.
For current Venetian Macau Rules with 6 decks
• Dealer stands on soft 17

• Double any two cards including after split
• Split Aces only once
• Split other pairs up to 4 hands
• Early surrender except against a dealer Ace
The House Edge has been calculated (Wizard of Odds) to be 0.16%
When considering the standard deviation, one has to take into account the
number of different dividends or losses that are possible given doubling,
splitting and the blackjack payout.
Blackjack
Bet Basic
Strategy
µ 0.9984
σ 1.15
House
Edge 0.16%
In practice, the House Edge will be different to this figure because all players
will not play optimal Basic Strategy

House Win and Standard Expectation for a Pattern of Bets
So far we have calculated the House Edge and associated standard deviation
for a single bet of one unit for a variety of bets.
The standard deviation becomes very useful when we extend our analysis to
various patterns of possible bets. The expressions below are presented
without proof and use the properties of linear combinations of independent
random variables.
An essential feature is that when you add a number of identical random

variables, the expectations add and the variances add (not the standard
deviations)
Here let µ represent the expected amount won (the House Edge) by the
House from 1 bet of one unit and let σ represent the standard deviation.
We will use the variable A to represent the amount won by the casino for a
related bet pattern and denote the corresponding parameters by
E ( A) = µ A and Var(A) =σ A2
We will use the variable R to represent the percentage won by the casino for
the related bet pattern and denote the corresponding parameters by
E ( R) = µ R and Var(R) =σ R2
Note that the two are related by
amount won A
R = percentage won = =
amount bet (turnover) amount bet
Bet pattern µA σA µR σR
(a) 1 bet of 1 unit µ σ µ σ
(b) 1 bet of b units bµ bσ µ σ

σ
(c) N bets of 1 unit Nµ Nσ µ N
σ
(d) N bets of b units N bµ N bσ µ N

Essential Points to Observe
1. In every case the expected value of the percentage won is the

same. That is, µ R = µ in every case, regardless of the way the bets
are distributed. The standard deviation of R however depends on the
number of bets.
2. In every case the expected value for A, the amount won, is given by
the total amount wagered multiplied by µ
µ A = (total amount wagered) × µ
3. The difference between one bet of $N and N bets of $1 can be seen by

comparing case (b) with b = N and case (c). The expected amount
won by the casino is the same ( µ A = N µ ) but the standard deviation
is different ( σ A = Nσ in case (b) and σ A = N σ in case (c) )
4. Note that in cases (a) and (b), the expressions for µ R and σ R are the
same. This can also be observed by comparing µ R and σ R in cases (c)
and (d). This illustrates the point made above that the spread of the
expected percentage win about the theoretical house advantage
depends on the number of bets and not on the size of the bets
(provided all bets are the same size) The standard deviation for the
1
percentage win is proportional to
N
The above table gives the expected value and the standard deviation for the
amount won, A and the percentage won, R for a given pattern of bets.
It does not tell us anything about the shape of the distributions of A and R
There is fortunately however, a powerful result, known as the “central limit

theorem”, which says that the probability distributions of A and R tend to the
Normal Distribution for N sufficiently large.
We will illustrate the above formal discussion by looking at some specific

examples.

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Game Bet and Math

A Course on the Mathematics of Gambling

Indeed, is there anyone, who with a

• Trying to perceive patterns when

• Seeking purpose where there is

Kamongo by Homer Smith

This workbook is intended to be used by participants in the actual conduct of

Dr Bob Crossman : ph +61408866212 : email drbob@doctorbob.com.au

Game Bet & Math v5 Workbook Page 1 Dr Bob

Why do they make money?

What information is needed to calculate the expected revenue from a punter

What information is needed to calculate the expected range of actual

What properties are needed for each betting event?

What mathematical parameters are calculated from this information?

What mathematical model do we need?

Game Bet & Math v5 Workbook Page 2 Dr Bob

In particular he wanted to compare:

The Theory of probability is a mathematical model that brings the superficial

What is a mathematical model?

Mathematical models occur in many contexts; e.g.

A mathematical model must start with a set of assumptions or axioms upon

The results or ‘laws’ predicted by mathematical models are in no sense

Game Bet & Math v5 Workbook Page 3 Dr Bob

real world abstract mathematical

The Modelling of probability

The basis for the model is the empirically observed phenomenon of

We now proceed formally to introduce various concepts, assumptions,

Game Bet & Math v5 Workbook Page 4 Dr Bob

• Does this random experiment satisfy condition 1?

• Does this random experiment satisfy condition 2?

• Does this random experiment satisfy condition 3?

• Why does the casino display the result of previous spins?

Game Bet & Math v5 Workbook Page 5 Dr Bob

The number pi is called the probability of the outcome ei and is a measure

The probability pi is chosen to satisfy:

1. each outcome is assigned a number called its probability, which is a

A probability of 0 corresponds to impossibility and a probability of 1 to

In general how do we assign probabilities to each outcome in the

Game Bet & Math v5 Workbook Page 6 Dr Bob

The concept of an ‘event’

The next concept we introduce is that of an ‘event’.

What are some events that could be associated with RE#1?

Game Bet & Math v5 Workbook Page 7 Dr Bob

Assign probabilities to the events that you associated with RE#1

Pr( E ) = number of outcomes in the event × probability of each event

number of outcomes in the event

Some Other Random Experiments

• RE#2 Toss two indistinguishable coins once (as in Dragon Phoenix)

• RE#3 Toss two distinguishable coins once

• RE#4 Toss two indistinguishable dice once (as in craps)

• RE#5 Toss two distinguishable dice

• RE#6 Select 5 cards without replacement from a standard deck of 52

• RE#7 Toss a die repeatedly until a 6 appears

• RE#8 Toss 3 dice (as in Sic Bo)

Game Bet & Math v5 Workbook Page 8 Dr Bob

1. Choose a suitable notation and write down the sample space of

Game Bet & Math v5 Workbook Page 9 Dr Bob

Game Bet & Math v5 Workbook Page 10 Dr Bob

The number of “permutations of n things taken r at a time” is denoted by

There are r terms each decreasing by one, commencing with n and

Where n ! is the symbol for n factorial (FACT( n ) in Excel)

The number of “combinations of n things taken r at a time” is denoted by

Returning to RE#6, the number of equally likely outcomes in the sample