Chapter 4:

 Definitions
 Types of probability
o A Priori (in Latin Before, Preceding etc.): Based on previous analysis, theory
(Scientific Process)
 E.g. without observing any previous tosses, we already know that obtaining a
head in a toss of a fair coin has the probability of 0.5.
o Empirical Classical: Based on observed data.
 E.g. A company has defaulted 3 times in 24 years. So its probability of
defaulting is 3/24=0.125
o Subjective Probability: Determined by an individual.
 E.g. “I think our probability of having hard questions in the exam is around
10%”
o ***Also check the examples in the lecture slides.
 Events in Sample Space
o Simple Event (One characteristic)(the set A)
 E.g. obtaining an odd number from a dice throw.
o Joint Event (More than one characteristic)(the intersection of sets A and B)
 E.g. obtaining an odd number that is greater than 3.
o Complement (Not having a certain characteristic)(A’)
 E.g. NOT obtaining an odd number from a dice throw.
o Mutually Exclusive Events: Events that have no common elements.
 E.g. Drawing a red card and drawing ace of spades(Maça ası) from a deck of
cards
o Collective Exhaustive Events: Events that cover the sample space when combined.
 E.g. Obtaining the number 5(A), obtaining a number less than 4(B), obtaining
an even number(C) from a dice throw.
 A={5}, B={1,2,3}, C={2,4,6}, then the Sample Space={1,2,3,4,5,6} is
fully covered.
 ***NOTE: Collectively Exhaustive and Mutually Exclusive events partitions the sample
space. (A partition is a process that divides a set to smaller sets such that the smaller sets
cover the entire space and they have no common element)
o E.g. A={1}, B={2,3}, C={4,5,6} when Sample Space={1,2,3,4,5,6}.
 JOINT and MARGINAL PROBABILITIES:
o Easiest way to see this is constructing a table:
Events Ace Not ace Total
Spades 1 12 13
Hearts 1 12 13
Clubs 1 12 13
Diamonds 1 12 13
Total 4 48 52
o The inner elements(with Italic font) are used to calculate the joint probabilities.
o The border elements (with Bold font) are used to calculate the marginal probabilities
 CONTINGENCY TABLE: Appropriate for two properties (Color, Being an ace)
Events Ace Not ace Total
Spades 1/52 12/52 13/52
Hearts 1/52 12/52 13/52
Clubs 1/52 12/52 13/52
Diamonds 1/52 12/52 13/52
Total 4/52 48/52 52

o The inner elements(with Italic font) are the joint probabilities.

o The border elements (with Bold font) are the marginal probabilities
 PROBABILITY SUMMARY:
o If P(X)=1 then X is a certain event
o If P(X)=0 then X is an impossible event
o If 0<P(X)<1, then X is an uncertain event
 GENERAL ADDITION RULE: P(A or B) = P(A) + P(B) –P (A and B)
 CONDITIONAL PROBABILITY: P (A|B) = P (A and B) / P (B)
o Given that B happened, what is the probability of having A happen?
o In a contingency table:

P (Ace |Spades) = P (Ace of Spades) / P(Spades)= (1/52)/(13/52)= 1/13

Events Ace Not ace Total

Spades 1/52 12/52 13/52
Hearts 1/52 12/52 13/52
Clubs 1/52 12/52 13/52
Diamonds 1/52 12/52 13/52
Total 4/52 48/52 52/52

 DECISION TREES: If more than 2 properties exist then constructing a table is impossible
(e.g. regarding a car: Color, having a radio, being convertible)
o Consider the following information:
 Color={Red, Blue}
 Having a radio={Radio, No radio}
 Convertible={Yes,No}
 ***Check the slides for a constructed decision tree.
 STATISTICAL INDEPENDENCE: A and B are independent iff(if and only if) P(A|B)=P(A).
o A and B are independent ⇒P(A|B)=P(A)
o P(A|B)=P(A) ⇒A and B are independent
o A and B are independent ⇔P(A|B)=P(A)
 MULTIPLICATION RULES: P(A and B)=P(A|B)P(B)
 BAYES’ THEOREM: P(Bi | A) = P(A|Bi)P(Bi)/[P(A|B1)P(B1)+ P(A|B2)P(B2)+...+ P(A|Bk)P(Bk)]
Chapter 5:

 DEFINITONS: (Random Variable, Discrete RVs, Continuous RVs)