Probabilty

Question 1

Probability as Odds

Answer 1

p/1-p

Question 2

P(A or B)

Answer 2

P(A)+P(B)-p(AB)

Question 3

Joint Probability

Answer 3

P(AB)=P(A|B)*P(B)

Question 4

Independent Probability

Answer 4

P(AB)=P(A)*P(B)

Question 5

Total Probability Rule

Answer 5

P(AB)= P(A|B)P(B)+P(A|Bc)P(Bc)

Question 6

Covariance

Answer 6

Probabilitydeviation1deviation2

Question 7

Corr

Answer 7

(Cov.ab)/(sa*sb)=p

Question 8

Porfolio VARIATION

Answer 8

(s.a)^2(w.a)^2+(s.b)^2(w.b)^2+2w.aw.bs.zs.b*p.ab

Question 9

Binomial Random Variable

Answer 9

[n!/(n-x)!x!]/p.x*(1-p)^n-x

Question 10

Tracking Error

Answer 10

R.p-R.b

Question 11

Normal Distribution Charesteristics and Confidence Intervals

Answer 11

Completely described by mean+variance
Kurtosis=3
1.65s-90%
1.96s-95%
2.58s-99%

Question 12

Safety-First Ratio

Answer 12

R.p-R.l/s.p

R.l=Target Return

Question 13

Sampling Error

Answer 13

Difference between sample statistic and true population mean

Question 14

Central Limit Theorem

Answer 14

For any population size, as the size of the sample increases, the closer the sample statistic gets to the population statistic and gets closer to the normal distribution

Question 15

Standard Error

Answer 15

s/sqrt(n)

Question 16

Point Estimate

Answer 16

Mean+/-(StandardError*Confidence Interval)

Question 17

Use T-statistic when:

Answer 17

Unknown Variance

Question 18

Use Z Statistic when:

Answer 18

Known Variance

Question 19

No Test Available when:

Answer 19

small sample size, nonnormal distribution, unknown variance

Question 20

Type I Error

Answer 20

Rejecting true Null Hypothesis

Probability equal to the confidence interval

Question 21

Type II Error

Answer 21

Fail to reject false null hypothesis

Question 22

Z-statitstic

Answer 22

x`-u/[s/sqrt(n)]

Question 23

T statistic formula

Answer 23

x`-u/[s/sqrt(n)]

Question 24

Difference in Means Test

Answer 24

Tests wether two normal independent populations have equal means
DMT is independent

Question 25

Mean Differences Test

Answer 25

Tests difference between means of 2 DEPENDENT samples

Question 26

Chi-squared test

Answer 26

Tests wether the variance of a normal poopulation is x, two-tailed test

Question 27

F Test

Answer 27

Tests wether the variance of 2 normal populations is equal

Populations can be two different sizes

Question 28

Parametric/Non-parametric tests

Answer 28

Parametric tests rely on parameters and distributions charesteristics