Basic Concepts of Probability Theory
Thanks to Newton’s laws, dropping a stone from a height of 10 m, the point of time of its impact on the ground is known before executing the experiment. Quantities in complex systems (such as stock prices at a certain date, daily maximum temperature at a certain place) are, however, not deterministically predictable, although it is known which values are more likely to occur than others. Contrary to the falling stone, data which cannot be described successfully by deterministic mechanism, can be modelled by random variables.
KeywordsConditional Expectation Stock Prex Daily Maximum Temperature Discrete Random Variable Continuous Random Variable
Unable to display preview. Download preview PDF.