Basic Probability Facts
Introduction
Statistics & Risk Management
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What is Probability?
• The probability of a random event denotes the
relative frequency of occurrence of an
experiment's outcome, when repeating the
experiment.
• Frequentists consider probability to be the
relative frequency "in the long run" of outcomes.
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Why Probability?
• Probability theory is applied in everyday life in
risk assessment and in trade on commodity
markets, and the gaming industry.
• Governments typically apply probabilistic
methods in environmental regulation, where it is
called pathway analysis.
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Analytical Method
• 100 M&Ms in a Bag
• 24 Blue ones
• p(b)=24/(24b+76o)=.24
• You have a .24 probability
of randomly drawing out a
Blue one.
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Probability to Odds
• 100 M&Ms in a Bag
• 24 Blue ones.
• p(b)=24/(24b+76o)=.24
• You almost have odds of 1
in 4 of randomly drawing
out a Blue one.
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Results p=
• 0.0 Not going to happen
• 1.0 It will happen every time
• ??? Somewhere in between
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Events
 Independent Events
 Mutually Exclusive
 Exhaustive (No More)
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Geometry
Midpoints
 A point is selected
at random in the
RED/BLUE square.
 Calculate the
probability that it
lies in the BLUE
triangle.
p(b)=???????
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