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FINANCIAL MARKET COURSES

Probability

Every day we make judgments based on probability. The weather forecaster announces that there is a 90% chance of a thunderstorm this evening. The gambler feels there is a 50% chance that his horse will win the race. These chances, termed probabilities, measure the likelihood of certain events occurring. In the financial world, probability is applied in measuring the risks involved in trading and investing and their effect on the rate of return.

 

This course outlines the fundamentals of probability, and covers the key terminology associated with probability theory. It describes the different types of probability and their calculation, and explains how probability theory facilitates investor decisions.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Define the concept of probability

    Describe and calculate different types of probability

    Assess the expected value of a random variable based on the probability of its possible outcomes, and explain how different risk preferences are combined with expected values to make investment decisions

    Recognize the effect of inflation on the present value of a future sum of money and explain how the existence of inflation can influence investment decisions

  • COURSE OUTLINE

    Topic 1: Definition of Probability

    The Principles of Probability

    Probability

    Probability – Example

    Topic 2: Types of Probibility

    Probability Types

    Relative Frequency

    Joint Probability

    Conditional Probability

    Conditional Probability – Example

    Conditional Probability Formula

    Additional Rule of Probability

    Additional Rule of Probability – Example

    Topic 3: Inflation Considerations

    Inflation

    Topic 4: Expected Value of a Random Variable

    Definition of Expected Value of Random Variable

    Expected Value of a Random Variable – Exmaple

    Risk Exposure

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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