Comment by alphazard

> Believing something is mispriced simply means the perceived risk is very low (or even negative)

That's not what risk means. Risk is the amount you stand to lose, and expected value is the mean outcome (calculated by integrating across all possible outcomes). The EV can be positive or negative, and that corresponds to a mispriced asset. Risk can only go to zero, but it can also be arbitrarily high.

Managing risk is its own thing, but to give an intuition: How much should you bet on repeated fair coin tosses that pay out 3:1, if you have $100? More than 0, because it is positive EV, but definitely not the whole 100. Risk management is about playing vs. not playing and bet sizing.

Gambling is taking on risk without positive EV. A 1:1 cointoss is the quintessential example. EV is 0, you won't make or lose anything in the long run playing this game. But it adds uncertainty, you could have twice as much or nothing. Gambling is risk-seeking, the variance of outcomes has value (to a gambler) on its own.