Overview

This eCourse consists of two modules. Module 1 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.

Module 2 is about random variables, probability distributions, the testing of hypotheses, and confidence levels. Understanding these concepts is essential in the financial world, particularly in option pricing and risk measurement. The tutorial covers the types of random variable and the probability distributions that each follows.

Objective

On completion of this course, you will be able to:
- Define the concept of probability
- Identify the different types of probability
- Calculate 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
- Describe how a random variable is distributed
- Compute the expected value and standard deviation/variance of a random variable
- Test hypotheses about the expected value of a variable
- Evaluate the likelihood of a certain event with a specified probability

Content

Module 1: Distributions
Topic 1: Random Variables & Simple Distributions
Topic 2: Continuous Distribution
Topic 3: Other Continuous Probability Distributions
Topic 4: Hypothesis Testing & Confidence Levels

Module 2: Probability
Topic 1: Principles of Probability
Topic 2: Types of Probability
Topic 3: Expected Value of a Random Variable