投资工具investment_tools.ppt

Figure 3-7 Probability A random variable is a quantity whose outcome is uncertain. Two defining properties of Probability. Probability of any event E is a number between 0 and 1, p(E). Sum of the probabilities of any list of mutually exclusive and exhaustive events equals 1. Mutually exclusive = one and only one event can occur at any time. Exhaustive = one of the events must occur, jointly cover all possible outcomes. Empirical probability - probability of an event occurring is estimated from data, usually in the form of a relative frequency. A priori probability - probability of an event is deduced by reasoning about the structure of the problem itself. Subjective probability - probability of an event is based on a personal assessment without reference to any particular data. Visualizing Sample Space 1. Listing S = {Head, Tail} 2. Contingency Table 3. Decision Tree Diagram Contingency Table Tree Diagram Forming Compound Events 1. Intersection Outcomes in Both Events A and B ‘AND’ Statement ? Symbol (i.e., A ? B) 2. Union Outcomes in Either Events A or B or Both ‘OR’ Statement ? Symbol (i.e., A ? B) Addition Rule 1. Used to Get Compound Probabilities for Union of Events: P(A OR B) = P(A ? B)  = P(A) + P(B) - P(A ? B) 2. For Mutually Exclusive Events: P(A OR B) = P(A ? B) = P(A) + P(B) Conditional Probability Conditional Probability: Probability that one Event will occur Given that Another Event has already occurred. To calculate a Conditional probability – Revise Original Sample Space to Account for New Information Eliminates Certain Outcomes Result: P(A | B) = P(A and B) P(B) Statistical Independence 1. Event Occurrence Does Not Affect Probability of Another Event Toss first die, what does its outcome tell you about the likely results in tossing the second die? Answer: Nothing. The two die are independent 2. Causality Not Implied 3. Tests For Statistical Independence P(A | B) = P(A) P(A and B) = P(A)