3.3: Portfolio Variance, Bayes, and Counting Problems

Question 1

Joint Probability Function is a function giving…

Answer 1

The probability of joint occurrences of values of stated random variables P(X,Y).

Question 2

Bayes formula - the rule for updating the probability of an event…

Answer 2

Given a set of prior probabilities for the event, and new information given the event.

Question 3

Bayes Theorem formula:

Answer 3

P(AIB) = P(B/A)*P(A) / P(B)

Question 4

Prior probabilities - probability reflecting…

Posterior probabilities - an updated probability that…

Likelihood - the probability of an observation…

Answer 4

Beliefs prior to the arrival of new information.

Reflects or comes after new information.

Given a particular set of conditions.

Question 5

Multinomial Formula (General Formula for Labeling Problems):

Answer 5

N! / n1!n2!…nk!

The number of ways that n objects can be labeled with k different labels, with n1 of the first type, n2 of the second type, and so on…

Question 6

A Combination is a listing in which..?

Answer 6

The order of the listed items does not matter.

Question 7

Combination Formula (Binomial Formula):

Answer 7

nCr = (n / r) = n! / (n-r)!*r!

The number of ways that we can choose r objects from a total of n objects,

Question 8

Permutation Formula:

Answer 8

nPr = N! / (n - r)!

The number of ways that we can choose r objects from a total of n objects, when the order in which the r objects are listed does matter.