Probability

Risk of Ruin

The probability that a bankroll hits zero before reaching a target, given a betting strategy.

Even a positive-edge strategy carries ruin risk if bets are large relative to capital. See gambler's ruin for the closed forms.

The key practical facts: ruin probability falls exponentially in bankroll units, so doubling your capital relative to your bet size does far more than doubling your safety. And against an unlimited opponent at fair odds, ruin is certain.

Why it dominates edge. A strategy with a large edge and a real chance of ruin is worse than one with a small edge and none, because ruin is absorbing - there is no recovery from zero, whatever your edge was.

Related terms

Practise this

Put it into practice

Knowing the definition is not the same as spotting where it applies under time pressure. Work the question bank free.

Start practising free

Browse the full quant interview glossary