ABM: Concepts and Practice · Part A: Statistics

Chapter 5: Probability and distributions

How to put a number on uncertainty, and the three curves that do most of a risk manager’s work: binomial, Poisson and normal.

Buyers of the e-book, or of the print copy, which includes it, read the whole chapter. Everyone can read the free sample, pages 1 to 24 of the e-book.

In this chapter

• 5.1Probability and its rulesp. 59
• 5.2Bayes’ theorem and expectationp. 60
• 5.3Binomial and Poissonp. 61
• 5.4The normal distributionp. 62
• 5.5Credit risk, VaR and option valuep. 63
• Exam traps and quick checksp. 64
• Practice: 16 questions in three roundsp. 65
• Answers, with every wrong option explainedp. 67
• Make it stickp. 69
• Chapter 5 on one pagep. 70

Corrections and updates

None for this chapter so far. Every correction to the book, and any rule that changes after its date, is listed on the errata page.