A predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.
- The fact that the problem is stochastic means that the airline needs to work with expected values and probability distributions, which makes the optimisation harder to solve.
- Now, it is well known in probability theory that the expected value of a uniformly distributed variable on a finite interval is the center of that interval.
- The premium will represent the expected value of these losses plus a small profit.
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