aol leg ele aol) Pa ee etiam eee ea P/1 Formula Sheet Basic Probability Relationships Pr(4 UB) = Pr(A) + Pr(B) ~ Pr(an BY Pr(4 UB UC) = Pr(4) + Pr(B) + Pr(c) Pr(An B) = Pr(B AC) =Pr(4 nc) + Prana) Pr(4') = 1 - Pr(A) Law of Total Probability Pr(B) = > Pr(BnA,) Conditional Probability _ bran) Pr(4|B) = “Pr(B) Bayes’ Theorem seerpr(BlA,)- P(A) Pr(ALIB) = Sm Pr(BlAid PrCAad De Morgan's Law rl(a BY = Prt’ 08") Pr[(A BY’) = Pr(4’ UB") Independence Pr(4 ni B) = Pr(A) - Pr(B) Pr(alB) = Pr(a) “Probability Mass Function (PMF) > Py(x) =1 o* *Cumulative Distribution Function (CDF) Fy (xq) = PrOX xq) = BE Pel) Pr(ac Xs b) = Fy(b) — Fea) fx) = Fe(x) (continuous) Pe(@) = 0 (continuous) **Expected Value ele] =c #Tg00) E[xX] = [909-00 ae Sf Sx(2) dx, for domain x = 0 SoG) - fio) dx BlgQOy sx sk] “prg=x=h Ble-gQ)] =e: £lgQ0) Eli) ++ geCO] = FLg OD) + UNIVARIATE PROBABILITY DISTRIBUTIONS + FLO] Varlx) Varlax +5] = Var|c] =0 “*Moment Generating Function (MGF) My(t) = Ele™ Mexen® M,(0)=1 Mysy(t) = we arometo| = 600] y(t) - My(E) (independent) Percentiles The 100p" percentile is the smallest value ofr where Fe(mp) 2 >. Univariate Transformation ld fr) = fila 2001: |e where y = g(x) 2x = Discrete Distributions Prov = x) FLX] Varlx] ‘Special Properties I Discrete Uniform — brati ate 2 Gat at Binomial (ra— mp Hypergeometric (C2) Geometric - tp Negative x1 tinomist | Gat pra- pr property: (X= alX > a)~x oe Poisson Continuous Distributions ‘Special Properties Continuous Uniform (OFX > e)muniform(e, b) (X= clX > c)~uniform(0,b - c) Exponential Memoryless property: o (alk > a=Gamma a8 ap? SS eee Tayo? 4 Gamma(e,6) ¥~Poisson(a ae Symmetry: Normal - “ | gw | prez say siz 2—2) Pr(Z < 2) = (2) Pr(Z s — Pr(Z =z) Central Limit Theorem Sum ofn identically and independently distributed (IID) random variables approximately follows a normal distribution ‘Sum of Normal RVs ~ Normal( = ¥.,#4,.0? = Eis 07) Expectation and Variance for Sum and Average of 1D RVs SHX both x “EEX MULTIVARIATE PROBABI “Joint PMF and CDF Lanz Dany Fry OY) Frye) sph (continuous) farGoy) ‘Marginal Distributions and Conditional Distributions FQ) = Zany fury) fo) = Sans fax .9) fay Gly) = fev Ge v)/ fr) ‘**Joint Expected Value and Conditional Expectation gl Lax, a) = fo J99) fry) dy ae ELXIY = yl} = [28 fal = y) de “Joint MGF Myy(s.t) = Ele] = fe Let fuvey) dy de Double Expectation; Law of Total Variance [ever] s[Varlx\¥]] + Var[etxiv] Covariance and Correlation Coefficient Cov[X.¥] = EIXY] ~ ELXIEW] Cov[aX, bY] CovlX, Varlax + bY] = a2Var[x] + b2Var[¥] + 2ab- CovlX,¥1 Puy = Corr[X, ¥] = cout, YI/|yVarlXlVVar¥]] Independence Fer (y) Fay Gy) E[ROD - KO Mzy(50) Covlx,¥1 Multivariate Transformation Bi tot dn E[X] = E[x] Var{X) Var|X] = (1/n)- Var[Xx} RIBUTIONS Multinomial Distribution Pr(X, FIX] =m, VarlXl = pdt - po covfX = —ney, C4) Bivariate Continuous Uniform fay.) = 1/Area of domain Pr (region) = Area of region / Area of domain. variate Normal For X~N(uy,0,2) and ¥~N (jy, 07 (1K =)-NEWIN = al verti where BWIX= xd = ay +p-07/ Var[¥IX = x] = 0,2(1 — p?) Order Statistics min, Xs, ey An) j= max(X Kar wr Xn) EL] = 2 Myy.0)] Fire (iW2) = fazre ltt): [et 3] Ror tip RVs: ny = lies Seal Sxuy(2) = [SDI BU = FM 6.0) Fy (2) = [FeCOI" Btxmy| = So Mey(5.8)| My (t,t) = Myey(2) WEY AND RISK MANAGEMEN’ Category Definition of Payment, ¥ EI¥) 0 Xsd Ig = d) fc) ax Deductible ae pres Poliey Limit psa fe a On ce Deductible and Poliey Limit ¥ed ag pian tw a {tis the policy limit/ dexcdtu a aera ‘maximum payment) Xodtw Se" SG) dx * Formulas are in the discrete case; learn both the discrete and continuous cases ** Formulas are in the continuous case; learn both the discrete and continuous cases