Risk premium
★★☆RP
Basic Definition
The risk premium refers to the difference between the equity required based on chip value and the equity required based on prize value in a tournament.
Specific Situation
- Near the tournament bubble, you face an all-in from an opponent. While a equity of 33% would make the call profitable in chip EV terms, a 50% equity is needed to make it profitable in terms of prize EV. In this case, the risk premium is 50% - 33% = 17%.
Important Information
- Near the tournament bubble or at the final table, the value of survival increases, which means the risk premium tends to be higher.
- When the risk premium is high, you should fold more hands than you normally would.
Examples of Term Usage
"Right before the bubble, since my stack is smaller than my opponent's, the risk premium is probably around 15%."