- CFA Exams
- 2023 Level I
- Topic 1. Quantitative Methods
- Learning Module 3. Probability Concepts
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Learning Outcome Statements PDF Download
| 1. Introduction define a random variable, an outcome, and an event; identify the two defining properties of probability, including mutually exclusive and exhaustive events, and compare and contrast empirical, subjective, and priori probabilities; describe the probability of an event in terms of odds for and against the event; | |
| 2. Unconditional, Conditional, and Joint Probabilities calculate and interpret conditional probabilities; | |
| 3. Addition Rule for Probabilities: the Probability that at Least One of Two Events Will Occur demonstrate the application of the multiplication and addition rules for probability; | |
| 4. Multiplication Rule for Independent Events compare and contrast dependent and independent events; | |
| 5. The Total Probability Rule calculate and interpret an unconditional probability using the total probability rule; | |
| 6. Expected Value (Mean), Variance, and Conditional Measures of Expected Value and Variance calculate and interpret the expected value, variance, and standard deviation of random variables; explain the use of conditional expectation in investment applications; interpret a probability tree and demonstrate its application to investment problems; | |
| 7. Expected Value, Variance, Standard Deviation, Covariances, and Correlations of Portfolio Returns calculate and interpret the expected value, variance, standard deviation, covariances, and correlations of portfolio returns; | |
| 8. Covariance Given a Joint Probability Function calculate and interpret the covariances of portfolio returns using the joint probability function; | |
| 9. Bayes' Formula calculate and interpret an updated probability using Bayes' formula; | |
| 10. Principles of Counting identify the most appropriate method to solve a particular counting problem and analyze counting problems using factorial, combination, and permutation concepts. |
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