Expected return (ER) is calculated by multiplying potential cashflow outcomes by the odds that they occur and then summing over the result.
ER = (return A x probability A) + (return B x probability B) + ...
- Grinold, Richard C., and Ronald N. Kahn. Active portfolio management: Quantitative theory and applications. Probus, 1995.
- Wilmott, Paul. Paul Wilmott introduces quantitative finance. John Wiley & Sons, 2007.