Date post: | 14-Jun-2015 |
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EC4024Lecture 4
| Probability & Statistics in Finance |
Today
Risk & Uncertainty
Define Probability/Statistics
Why is it used in Finance?
Examples
Mini Presentations
Risk & Uncertainty
ProbabilityIt is a measure of how plausible an event is
We measure probability using a real number between 0 and 1
(Percentage is clear?)
A probability of 0 means an event is impossible
Probability of 1 means an event is certain
The probabilities of all the events in our sample space add up to 1
Experiments
Histograms
200 400 600 800
20
40
60
80
Law of Large Numbers
Handout
Distributions
Bored?
Example: Hold’Em
Next Time
Read Cowles, 1933, in coursepackRead NotesDo Exercises