Module 4.1 - Probability Models, Expected Values & Bayes Flashcards
(7 cards)
1
Q
What is the expected value?
A
Weighted average of the possible outcomes for the variable.
2
Q
What is the expected value equation?
A
3
Q
What is probability model variance?
A
The probability weighted sum of the squared deviations from the expected value.
4
Q
What are the steps to calculate probability model standard deviation.
A
- Multiply returns by probability.
- Sum and average.
- Find all deviations from average
- Square each deviation
- Multiply by probability
- Sum then square root for standard deviation
5
Q
What is a probability tree?
A
General framework to show the probabilities of various outcomes.
6
Q
Define conditional expected values.
A
Values contingent on the outcome of some OTHER event.
7
Q
Bayes formula - talk about its use and what it looks like.
A
Used to update given set of probabilities for a given event in response to the arrival of new information.
