Risk premium
The extra equity ICM demands for an all-in, over what the chips alone would need.
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- What it means
- In chips, an all-in needs the equity the price sets. Under ICM, busting costs more than doubling up gains, so the same all-in needs more. The difference is the risk premium.
- How it is calculated
- Value three outcomes in prize pool shares: folding, winning the all-in and losing it. The equity needed is (fold − lose) ÷ (win − lose). Do the same in chips; the risk premium is the ICM figure minus the chip one.
- Worked example
- Stacks of 5,000, 3,000 and 2,000 with payouts of 50, 30 and 20. The 3,000 stack calls the big stack's shove, blinds aside. In chips it needs 50%. In ICM, folding keeps 32.75, winning is worth 41 and busting pays 20, so it needs (32.75 − 20) ÷ (41 − 20) = 61%: a risk premium of 11 points.
- Why it matters
- The risk premium is the number to add to your chip EV instincts near the money. It is biggest for medium stacks facing a stack that covers them, and shrinks when you cover the other player.
Try it: Push/fold calculator
Lessons that teach it: Why a bubble call needs more than its price, The same all-in risks different amounts · lessons other than the free one need an invite
See also: ICM, chipEV, Required equity