# Law of Large Numbers

*Math & Statistics — Finicade finance glossary*

The law of large numbers says the sample average converges to the true mean as the sample grows. It's the foundation of insurance — one policy is a gamble, a million policies are a predictable business — and of Monte Carlo pricing. It is not the gambler's 'law of averages': past outcomes don't get corrected, they get diluted, and convergence is slow at the square root of sample size.

**Also known as:** LLN, law of averages

**Related terms:** [Central Limit Theorem](https://finicade.com/glossary/central-limit-theorem), [Expected Value](https://finicade.com/glossary/expected-value), [Monte Carlo Simulation](https://finicade.com/glossary/monte-carlo), [Insurance](https://finicade.com/glossary/insurance), [Sampling](https://finicade.com/glossary/sampling)

Source: https://finicade.com/glossary/law-of-large-numbers