Vypracované otázky: Quantitative Methods

Probability distributions provide a more quantitative insight into an asset’s risk. The probability of a given outcome is its chance of occurring. An outcome with an 80 percent probability of occurrence would be expected to occur 8 out of 10 times. An outcome with a probability of 100 percent is certain to occur. Outcomes with a probability of zero will never occur.

Briefly:
Probability - The chance that a given outcome will occur.
Probability Distribution - A model that relates probabilities to the associated outcomes


The simplest type of probability distribution is the bar chart, which shows only a limited number of outcomes and associated probabilities for a given event.

If we knew all the possible outcomes and associated probabilities, we could develop a continuous probability distribution. This type of distribution can be thought of as a bar chart for a very large number of outcomes.

Continuous probability distribution - a probability distribution showing all the possible outcomes and associated probabilities for a given event.