|
 |
 



Statistics and Data

Analysis
Professor William Greene
Stern School of Business
IOMS Department
Department of Economics

|
 |
  

Statistics and Data Analysis

|
 |
  

|
 |
  

CNN Poll: Double-digit post-speech jump for Obama plan

Posted: September 10th, 2009 04:18 PM ET
WASHINGTON (CNN) Two out of three Americans who watched President
Barack Obama's health care reform speech Wednesday night favor his health
care plans a 14-point gain among speech-watchers, according to a
CNN/Opinion Research Corporation national poll of people who tuned into
Obama's address Wednesday night to a joint session of Congress.
Sixty-seven percent of people questioned in the survey say they
support Obama's health care reform proposals that the president outlined in his
address, with 29 percent opposed. Those figures are almost identical to a poll
conducted immediately after Bill Clinton's health care speech before Congress in
September, 1993.
The audience for the speech appears to be more Democratic than the
U.S. population as a whole. Because of this, the results may favor Obama simply
because more Democrats than Republicans tuned into the speech. The poll
surveyed the opinions of people who watched Wednesday night's speech, and
does not reflect the views of all Americans.

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Probability: Probable Agenda

>
>

>

Randomness and decision making

Quantifying randomness with probability
Types of probability: Objective and
Subjective
Rules (axioms) of probability
Probabilities of events
Compound events
Computation of probabilities
Independence
Joint events and conditional probabilities
Bayes Theorem

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Decision Making Under Uncertainty

>
>
>

>

Understanding probability
Using probability to understand expected
value and risk
Applications
Financial transactions at future dates
Travel mode (or time)
Product purchase
Insurance (and warranties)
Enter a market
Legal enterprises
Any others?
Life is full of uncertainty

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

What is Randomness?
>A

lack of information?
> Can it be made to go away with
enough information?

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

|
  

>
>

>
>

Quantifying randomness
The context: An i
i
i that admits several
possible outcomes
Some outcome will occur
The observer is uncertain which (or what) before
the experiment takes place
= i
i the set of possible outcomes. (Also
called the  
i
i.)
|
  
a measure of likelihood attached to
the events in the event space. (Try to define
probability without using a word that means
probability.)

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



|
 |
  

|
  i
i= i

  i
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



|
 |
  

Assigning Probabilities

 = 
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



|
 |
  

 |
  

s

 
  






 
  

 
 

   




  





 
 







  




 
  
! 
 

 
    
   

 


  
"
#$%%

"




  


Quotes from Spillonomics: Underestimating Risk

By DAVID LEONHARDT, New York Times Magazine,
Sunday, June 6, 2010, pp. 13-14.

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|







|
 |
  

Sources of Probability
Physical events mechanical. Random number generators,
e.g., coins, cards, computers
i  i long run frequencies (the law of large numbers)
i  i probabilities, e.g., sports betting, belief of the risk of
flying. Assessments based on the accumulation of personal
information.
Aggregation of subjective frequencies (

i , sports
betting lines, insurance, casinos, racetrack)
Mathematical models: weather, options pricing
Extremely rare events can we really attach probabilities to
these? (Found at Gettysburg, 2 bullets that collided in midair.
What is the probability?)

>
>
>

>
>
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Rules (Axioms) of Probability

An i i E will occur or not occur
> P(E) is a number that equals the
probability that E will occur.
> By convention, 0 < P(E) < 1.
> E the event that E does not occur
> P(E) the probability that E does not
occur.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Essential Results for Probability

>
>
>

>
>

If P(E) 0, then E cannot (will not) occur

If P(E) 1, then E must (will) occur
E and E are i   i either E or Ewill
occur.
Something will occur, P(E) + P(E) 1
Only one thing can occur. If E occurs, then E
will not occur E and E are i  i.

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



_


|
 |
  


 i= i

Define an event set of more than two
possible equally likely i ii


i i
> 
i i: An event that
consists of a set of elementary events.
> The compound event occurs if any of
the elementary events occurs.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



4


|
 |
  

Counting Rule for

Probabilities
Probabilities for compounds of
atomistic i
 i
i i are
obtained by counting.
> P(Compound Event)
>

Num er of Element r Events in Compound Event

Num er of Elements in t e mple p ce

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Compound Events

v
 _
=  i

  ii


i

 

= i
= ii


= i

 = i

i_
|

|| |_v _v _v _ _
|!"iiii|#i
$|
iv _v _v
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



vv


|
 |
  

Counting the Number of Events:

Permutations and Combinations
>

>

|i
  Number of possible

arrangements of a set of N items:
E.g., 4 kids, Allison, Julie, Betsy, Lesley.
How many different lines with 3 of them?
AJB, ABJ, AJL, ALJ, ABL, ALB, all with
Allison first:
JAB, JBA, JAL, JLA, JBL, JLB, all with Julie
first.
And so on 24 different lines in total.

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Counting Permutations
>

Whats the rule?

N items in total
Choose sets of r items
Order matters

N possible first choices, then N-1

second, then N-2 third, and so on.
> Nx (N-1)x(N-2)xx(N-r+1)
> 4 kids, 3 in line, 4*3*2 24 ways.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Permutations

N(N - )(N - )...

N Pr =
(N - r)(N - r - )...
N!
=
(N - r)!
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Permutations
The number of ways to put N
objects in order is N(N-1)(1)
N! E.g., AJEL, ALEJ, AEJL, and
so on. 24 possibilities
> The number of ways to order r
objects chosen out of N is
>

N!
N(N -1)(N - 2)...(N - r +1)
$ |

(N - r)!
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v



|
 |
  

Permutations and Combinations

E.g., 8 Democratic
presidential candidates; How
many ways can one order 2
of them? There are 8
possibilities for the first and
7 for the second, so
> 8(7) 6 8!/(8-2)! 8!/6!
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Combinations and Permutations

What if order doesnt matter?
E.g., out of A,J,E,L, 12 permutations of 2 are
AJ AE AL JE JL EL LE LJ EJ LA EA JA. Here
order matters
But suppose AJ and JA are the same event
(order doesnt matter)? The list double counts.
The number of repetitions is the number of
permutations of the r items, which is r!.

>

t is

>

N


r

>
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Combinations and Permutations

The number of   is the
number of permutations when order
does not matter.
N(N - )(N - )...(N - r
r(r - )...( )

N!
=

(N - r)!r!

 &



   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v_%v4


|
 |
  

Useful Results
$
$
  v
  v
  v


$
$
$
$$ % v $

  v

  v
  $
 


 v

 $
$ $





 

 i
 

v

 $%

 v    

&ii"i i


$ %
" ii i
 
i

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Appplications:
Games of Chance; Poker
In a card hand from a deck of 2,
there are 2* 1* 0*49*48)/( *4*3*2*1)
different possible hands. (Order
doesnt matter). 2, 98,960 possible
hands.
> How many of these hands have 4
aces? 48 the 4 aces plus any of the
remaining 48 cards.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Probability of 4 Aces
Number of hands with 4 aces
P(4 Aces)
Number of hands with cards
4 48



4  1 


2


 
1 48

%'()#
2, 98,960
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

The Dead Mans Hand

The dead mans hand is cards, 2 aces, 2 8s
and some other th card (Wild Bill Hickok was
holding this hand when he was shot in the back
and killed in 1876.) The number of hands with
two aces and two 8s is

 44 1, 84

>

  

The rest of the story claims that Hickok held all

black cards (the bullets). The probability for this
hand falls to only 44/2 98960. (The four cards in
the picture and one of the remaining 44.)
Some claims have been made about the th card,
but noone is sure there is no record.

>

>


 i"
i 
 " i ' ' 

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Counting the Dead Mans Cards

&i i &i
i
i 
 i

    

( ) () ( ) ( ) ( ) ( )



!(
)!
 
&i_&i
i
i  
 i

 _ _ _ _

( ) () ( ) ( ) ( ) ( )
4
4!

6


2
2!(4
2)!
 
&i
i
i
i 
ii  
i i _
The total number of possible different hands is therefore 6(6)(44) 1, 84. If he
held the bullets (black cards), then there are only (1)(1)(44) 44 combinations.
There is a claim that the th card was a diamond. This reduces the number of
possible combinations to (1)(1)(11).
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



%


|
 |
  

Some Poker Hands

 #i  i i

  i ( )

   &


 



 ii

!
  
ii 
i
 i

!
 

 i
 
"i i


  
 
i



   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Probabilities of

Card Poker Hands

|


 


| 




 


 !"#"$%&"'


!#
!( %%&$"!'

)   * !"(#$"%!'
  


#&
&"#$#'
 
!$%
 %#&#"!'

$(
"#   ('


$&
!"&##(& '
+ 


$"&
&&( #'
+, |

&!$ &
% !" #&'
|

$"($&
&& #"&%#'

- ).   /* $!&$ 
 %%!"'
+ 
&$ "($"#



 """
   |i


   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



_


|
 |
  

Odds (Ratios)
Prob(Event)
Odds in Favor
1-Prob(Event)
1-Prob(Event)
Odds Against
Prob(Event)

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



4


|
 |
  

Odds vs.

Card Poker Hands

|




| 




 


 !"#"$%&"'


!#
!( %%&$"!'

)   * !"(#$"%!'
  


#&
&"#$#'
 
!$%
 %#&#"!'

$(
"#   ('


$&
!"&##(& '
+ 


$"&
&&( #'
+, |

&!$ &
% !" #&'
|

$"($&
&& #"&%#'

- ).   /* $!&$ 
 %%!"'
+ 
&$ "($"#



 """
   |i


   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Joint Events
>

>

>
>

Pairs (or groups) of events: A and B

One or the other occurs: A 
B A O B
Both events occur A  B A f B
i
iii i: Occurrence of A does not
affect the probability of B
An 
 i: P(A O B) P(A)+P(B)-P(A f B)
The

 
 i for independent events:
P(A f B) P(A)P(B)
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Joint Events:
Pick a Card, Any Card
Event  Diamond: P(Diamond) 13/ 2
2 3 4
6 7 8 9 10 J Q K A
> Event  Ace: P(Ace) 4/ 2
A A A
A
> Event  or  Diamond or Ace
P(Diamond or Ace)
P(Diamond) + P(Ace) P(Diamond Ace)
13/ 2 + 4/ 2 1/ 2 16/ 2
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Application
Survey of 27326 German Individuals over years
Frequency in black, sample proportion in red.
E.g., .041861144/27326, . 212314243/27326

*
i


i

&

   

|
 |


 


 
    

|

i i

 i

&

vv

v44

v

v_



vv4

vv44

v



 4v

__

__
v

v_

v



_


v

v


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

The Addition Rule - Application

Survey of 27326 German Individuals over

*
i


i

&

i i

 i

&

vv

v44

v

v_



vv4

vv44

v



 4v

__

__
v

v_

v



_


v

v

years

  
"



i 
i i

| i i 

i| i i|
i | i i  
i
___
v%  4v
4

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Product Rule for i
ii= i

>

If two events A and B are independent, the

probability that both occur is P(A fB) P(A)P(B)

>

Example: I will fly to Washington (and back) for a meeting on

Monday. I will use the train on Tuesday.
P(Late if I fly) .6.
P(Late if I take the train).2.
Late or on time for the two days are independent.

>

What is the probability that I will miss at least one meeting?

P(Late Monday, Not late on Tuesday) .6(.8) .48
P(Not late Monday, Late Tuesday)
.4(.2) .08
P(Late Monday and Late Tuesday) .6(.2) .12
P(Late at least once)
.48+.08+.12 .68
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|







|
 |
  

Joint Events and Joint Probabilities


 

  
Probability for
each event, without considering the
other.
> 

  
Probability that
two (several) events happen at the
same time
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Marginal and Joint Probabilities

Survey of 27326 German Individuals over years
Consider drawing an individual at random from the sample.

*
i


i

&

i i

 i

&

vv

v44

v

v_



vv4

vv44

v



 4v

__

__
v

v_

v



_


v

v


 |
  i+| i
v|
i__
v

|
  i+| i  
i__

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Conditional Probability
Conditional event occurrence of an
event given that some other event has
occurred.
> Conditional probability Probability of
an event given that some other event
is certain to occur. ii|,
|
  
"  
 i
 

i
>

Prob(A|B) Prob(A and B) / Prob(B)

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



_


|
 |
  

Conditional Probabilities
Company ESI sells two types of software, Basic and
Advanced, to two markets, Government and Academic.
Sales occur with the following probabilities:
Academic
.4
.3
.7

Basic
Advanced
Total

Government
.2
.1
.3

Total
.6
.4
1.0

P(Basic | Academic)
.4 / .7 . 71
P(Government | Advanced) .1 / .4 .2
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



4


|
 |
  

Conditional Probabilities
  
"


i 
i 
  i-i
  i  
i 

|*
i, i i

|*
i  i i | i i
v_ __
| i,
i
| i 
i |
i
__ __
v
 v
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

The Product Rule for

Conditional Probabilities
>
>

>

>
>

For events A and B, P(A fB)P(A|B)P(B)

Example: You draw a card from a well shuffled
deck of cards, then a second one. What is the
probability that the two cards will be a pair?
There are 13 cards.
Let A1 be the card on the first draw and A2 be the
second one. Then, P(A1 fA2) P(A1)P(A2|A1).
For a pair of kings, P(K1) 1/13. P(K2|K1) 3/ 1.
|.v f.v v
v. There are 13 possible
pairs, so P(Pair) 13(1/13)(3/ 1) 1/17.
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



v


|
 |
  

Independent Events
Events are independent if the
occurrence of one does not affect
probabilities related to the other.
> Events A and B are independent if
P(A|B) P(A). I.e., conditioning on B
does not affect the probability of A.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Independent Events?
Pick a Card, Any Card
P(Red card drawn) 26/ 2 1/2
> P(Ace drawn)
4/ 2
1/13.
> P(Ace|Red) (2/ 2) / (26/ 2) 1/13
> P(Ace) P(Ace|Red) so Red Card
and Ace are independent.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Independent Events?
Company ESI sells two types of software, Basic and Advanced, to two
markets, Government and Academic.
Sales occur randomly with the following probabilities:
Academic
.4
.3
.7

Basic
Advanced
Total

Government
.2
.1
.3

Total
.6
.4
1.0

P(Basic | Academic)
.4 / .7 . 71 i |  
P(Government | Advanced) .1 / .4 .2
i |- 
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Litigation Risk Analysis

| i,i 

i 
|i , ii 0


 """ii   i ii i &ii &
ii
i
//  
// 
/
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|







|
 |
  

Litigation Risk Analysis

"ii i0&-&=i

  
"i" |=
0  $!!=&
||
i

  i| i,|
i

   

|
 |


 


 
    

|

 ||
i

 
1




 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |

0 
*
|
  iii
i !
i

 

Two paths to a favorable outcome. Probability

(upper) .7(.6)(.4) + (lower) . (.3)(.6) .168 + .09 .2 8.
How can I use this to decide whether to litigate or not?

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|






|
 |
  

Using Conditional Probabilities:

Bayes Theorem
P( ,B)
Target
P( | B)
P(B)
P(B | )P( )
Theorem

P(B)
P(B | )P( )
efinition

P( ,B) P(not ,B)

P(B | )P( )

Com tation
P(B | )P( ) P(B | not )P(not )
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



_


|
 |
  

Using Bayes Theorem

If I choose a cookie from Bowl #1, the probability it is chocolate chip is

P(CC|#1) P(CC and #1)/P(#1) .12 / . .2 0 1/4
If you give me a chocolate chip cookie, what is the probability it came from
Bowl #1? |v,|,v|v |v v   _v 
Example from http://en.wikipedia.org/wiki/Bayes'_theorem
   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|



4


|
 |
  

Drug Testing
>

>

>

>

Data
P(Test correctly indicates disease).98 (Sensitivity)
P(Test correctly indicates absence).9 (Specificity)
P(Disease) .00 (Fairly rare)
Notation
+ test indicates disease, indicates no disease
D presence of disease, N absence of disease
Data:
P(D) .00 (Incidence of the disease)
P(+|D) .98 (Correct detection of the disease)
P(|N) .9
(Correct failure to detect the disease)
What are P(D|+) and P(N|)?
Note, P(D|+) the probability that a patient actually has the
disease when the test says they do.

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|







|
 |
  

More Information
Deduce: Since P(+|D).98, we know
P(|D).02 because P(-|D)+P(+|D)1
P(|D) is the P(False negative).
> Deduce: Since P(|N).9 , we know
P(+|N).0 because P(-|N)+P(+|N)1
P(+|N) is the P(False positive).
> Deduce: Since P(D).00 , P(N).99
because P(D)+P(N)1.
>

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|




v


|
 |
  

Now, Use Bayes Theorem

e ha e ( | )=.

. hat is ( | )?

P( a
)
P( | )P( )
=
(By Bayes Theorem)
P( )
P( )
P( ) = P( a
) P(N a
)
P( | )=

= P( | )P( )
P( | ) =

P( |N)P(N) so

P( | )P( )
P( | )P( )
=
P( | )P( ) P( |N)P(N)
P( )
.

Usi

the same a

   

|
 |


 

(.

(. 5)
5)+. 5(.

5)

= .

(!!)

roach, P(-|N) = .


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|







|
 |
  

Summary
>
>

Randomness and decision making

Probability
Sources
Basic mathematics (the axioms)

>
>

Simple and compound events and

constructing probabilities
Joint events
Independence
Addition and product rules for probabilities

>

Conditional probabilities and Bayes theorem

   

|
 |


 


 
    

|


 
    

|

|   |   

& 



|


 

  

  




#

#

!

'$

 #

| ( )

 !



!#

i

!

!

"




#

#






|   
  







!
!

!

!













#
  

"



!

!

!





|

"
#





!

#

"
#



!

! " " 

"

!


   
!" 

" " 

$ %
&

"



 

!

"
"



  

  
   



 

&







          

" " 
! " "

|


 

 
$ %


 
|

      

|

      



















|  

    

  

|

  
! 

 |    

|

 
    

    

&  (  *
    
|



   
     
 

          



!







|











#

 "
  































"
#



  













!





 
|