Tree Diagram
A tree diagram is a visual representation of all possible future outcomes and... Read More
Unconditional probability (also known as marginal probability) is simply the probability that an event occurs without considering any other preceding events. In other words, unconditional probabilities are not dependent on the occurrence of any other events; they are ‘stand-alone’ events. Therefore, if we are interested in the probability of an event, say, A, the standard annotation is P (A). Let us look at a few examples.
- The probability that it will rain on a given day without considering the rainfall pattern of a given area or any other climatic factor.
- The probability that a given stock will earn a 10% annual return without considering the preceding annual returns.
Conditional Probability
A conditional probability is the exact opposite of an unconditional probability. Our interest lies in the probability of an event ‘A’ given that another event ‘B ‘ has already occurred. This is what you should ask yourself:
“What is the probability of one event occurring if another event has already taken place?
We pronounce P (A | B) as “the probability of A given B.”
The bar sandwiched between A and B indicates “given.”
Examples
- What is the probability that it will rain on a given day, given that there have been rains on each of the 3 preceding days?
- The probability that a stock will earn a 10% annual return, given that it has earned a 9% return during each of the two previous financial years.
Understanding the theory behind conditional and unconditional probabilities will help you understand and work out solutions for quantitative probability questions.
Sergio Torrico
2021-07-23
Excelente para el FRM 2
Escribo esta revisión en español para los hispanohablantes, soy de Bolivia, y utilicé
AnalystPrep para dudas y consultas sobre mi preparación para el FRM nivel 2 (lo tomé una sola vez y aprobé muy bien), siempre tuve un soporte claro, directo y rápido, el material sale rápido cuando hay cambios en el temario de GARP, y los ejercicios y exámenes son muy útiles para practicar.
diana
2021-07-17
So helpful. I have been using the videos to prepare for the CFA Level II exam. The videos signpost the reading contents, explain the concepts and provide additional context for specific concepts.
The fun light-hearted analogies are also a welcome break to some very dry content.
I usually watch the videos before going into more in-depth reading and they are a good way to avoid being overwhelmed by the sheer volume of content when you look at the readings.
Kriti Dhawan
2021-07-16
A great curriculum provider. James sir explains the concept so well that rather than memorising it, you tend to intuitively understand and absorb them.
Thank you ! Grateful I saw this at the right time for my CFA prep.
nikhil kumar
2021-06-28
Very well explained and gives a great insight about topics in a very short time. Glad to have found Professor Forjan's lectures.
Marwan
2021-06-22
Great support throughout the course by the team, did not feel neglected
Benjamin anonymous
2021-05-10
I loved using AnalystPrep for FRM.
QBank is huge, videos are great.
Would recommend to a friend
Daniel Glyn
2021-03-24
I have finished my FRM1 thanks to AnalystPrep. And now using AnalystPrep for my FRM2 preparation. Professor Forjan is brilliant. He gives such good explanations and analogies. And more than anything makes learning fun. A big thank you to Analystprep and Professor Forjan. 5 stars all the way!
michael walshe
2021-03-18
Professor James' videos are excellent for understanding the underlying theories behind financial engineering / financial analysis. The AnalystPrep videos were better than any of the others that I searched through on YouTube for providing a clear explanation of some concepts, such as Portfolio theory, CAPM, and Arbitrage Pricing theory. Watching these cleared up many of the unclarities I had in my head. Highly recommended.