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Bayes Theorem
P(AB)=P(A|B)P(B) =P(B|A)P(A)
P( B | A)
P( A | B)
P( A)
P( B)
Figure 1: Probability Matrix for Bond A and Bond B:
P( A | B)
2-17
P( AB) 4% 1
33.33%
P( B) 12% 3
3-17
70%
Outperform
Excellent
30%
20%
Not Outperform
Manager
80%
50%
Outperform
Average
50%
4-17
Not Outperform
5-17
70%3
Excellent
1-70%3
20%
Manager
80%
50%3
Average
1-50%3
6-17
7-17
8-17
9-17
10-17
70%
Outperform
Excellent
1-70%
40.7%
Not Outperform
50%
Outperform
Average
1-50%
11-17
Not Outperform
12-17
80%
Outperform
Excellent
15%
Outperform
50%
Manager
55%
Average
30%
20%
Outperform
Below Average
13-17
14-17
15-17
16-17
FRM
17-17