PROBABILITY

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PROBABILITY
POSSIBILITY OF AN EVENT TO OCCUR
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INDEX

• INTRODUCTION
• ETYMOLOGY
• TYPES OF PROBABILITY
• HOW TO CALCULATE PROBABILITY?
• BASIC CONCEPTS
• APPLICATION
• ABOUT US

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INTRODUCTION

• Probability is a branch of mathematics which
  deals calculating likely outcomes of a given
  event. It is expressed as a number between 0 to
  1.
• TYPES OF EVENT
• An event with a probability of 1 can be
  considered a certainty.
• An event with a probability of .5 can be
  considered to have equal chances of occurring or
  not occurring.
• An event with a probability of 0 can be
  considered an impossibility.
• An event that is unlikely to occur will have a
  probability between 0 and 0.5.
• An event that is likely to occur will have a
  probability between 0.5 and 1.

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ETYMOLOGY
The word Probability derives from the Latin
probabilitas, which can also mean probity, a
measure of the authority of a witness in a legal
case in Europe, and often correlated with the
witness's nobility. In a sense, this differs much
from the modern meaning of probability, which, in
contrast, is a measure of the weight of empirical
evidence, and is arrived at from inductive
reasoning and statistical interference.
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TYPES OF PROBABILITY

• Classic Probability
• The classical approach to probability often
  involves coin tossing or rolling dice. It is
  calculated by listing all of the possible
  outcomes of the activity and recording the actual
  occurrences. For example, if you are tossing a
  coin, the possible outcomes are either heads or
  tails.
• Experimental Probability
• Experimental probability is based on the number
  of possible outcomes by the total number of
  trials. When tossing a coin, the total possible
  outcomes are two, heads and tails. The total
  number of trials is determined by the total times
  the coin is flipped. If the coin is flipped 50
  times and it lands on heads 28 times, then the
  theoretical probability is 28/50.
• Theoretical Probability
• Theoretical probability is an approach that bases
  the possible probability on the possible chances
  of something happen. For example, if you want to
  know the theoretical probability that a die will
  land on a number "3" when rolled, you must
  determine how many possible outcomes there are.
  On a die, there are six numbers, offering six
  possibilities.
• Subjective Probability
• Subjective probability is based on a person's own
  personal reasoning and judgment. It is the
  probability that the outcome a person is
  expecting will actually occur. There are no
  formal calculations for subjective probability
  but instead it is based on a person's own
  knowledge and feelings. For example, during a
  sport's game, a fan of one team may state that
  the team they are rooting for will win.

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FORMULA TO CALCULATE PROBABILITY
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BASIC CONCEPTS
Probability of a Single Event If you roll a
six-sided die, there are six possible outcomes,
and each of these outcomes is equally likely. A
six is as likely to come up as a three, and
likewise for the other four sides of the die.
What, then, is the probability that a one will
come up? Since there are six possible outcomes,
the probability is 1/6.
Probability of A and B When two events are
independent, the probability of both occurring is
the product of the probabilities of the
individual events. More formally, if events A and
B are independent, then the probability of both A
and B occurring is
P(A and B) P(A) x P(B)
Probability of A or B If Events A and B are
independent, the probability that either Event A
or Event B occurs is
P(A or B) P(A) P(B) - P(A and B)
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APPLICATIONS

• IN FINANCIAL MARKETS.
• IN RISK MANAGEMENT.
• IN ENVIRONMENTAL REGULATION.
• IN ANALYSIS.
• IN COMMUNICATION NETWORKS.
• IN SIGNAL THEORY.
• IN RESEARCH.
• IN INFORMATION TECHNOLOGY.

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