Basic Probability:

A ( B C ) ( A B) ( A C )
A ( B C ) ( A B) ( A C )

M X (0) 1

( A B ) ' A ' B '

( A B ) ' A ' B '

M aX b (t ) etb M X (at )
P ( X 1 x1 , X 2 x2 ,..., X k xk )

M X (t ) E (etX ) etX p ( x )
MX

(n)

(0) x n p ( x) E ( X n )

n!
x
x
x
p1 1 p2 2 ... pk k
x1 !x2 !
... xk !

P ( A B ) P ( A) P ( B ) P ( A B )
P ( A B C ) P ( A) P ( B ) P (C )
P( A B) P ( A C ) P ( B C ) P ( A B C )

Continuous Random Variables

n
n!

r !(n r )!
r

P (a X b) f ( x)dx
a

P( A B)
P( B)
P ( A B ) P( A / B ) P ( B )
P ( A '/ B) 1 P ( A / B)
P ( A B / C ) P ( A / C ) P ( B / C ) P( A B / C )
P ( A) P ( A / B ) P ( B ) P( A / B ') P ( B ')
P ( E ) P ( A1 E ) P ( A2 E ) ... P ( An E )
P( A / B)

f ( x)dx 1

F ( x) P ( X x)
x

F ( x)

f (u )du

F '( x) f ( x )
P (a X b) F (b) F (a )
lim F ( x ) 1
x

Independence:
P ( A / B ) P ( A)
P ( A B ) P( A) P ( B )
Discrete Random Variables
a (1 r n 1 )
2
n
a ar ar ... ar
1 r
a
a ar ar 2 ... ar n ...
1 r
E ( X ) x p ( x) Mean
E ( aX ) aE ( X )
E ( aX b) aE ( X ) b
V ( X ) ( x ) 2 p ( x) E ( x ) 2
V (X ) 2
V (aX ) a 2V ( X )
V (aX b) a 2V ( X )
V ( X ) E ( X 2 ) E ( X )2

lim F ( x) 0

d
d
P (T t ) P(T t ) or F '( x) S '( x)
dt
dt
E( X )

x f ( x)dx

E g ( X )

g ( x) f ( x)dx

M X (t ) E (e )
tX

x e

n ax

dx

cx
xe dx

xecx ecx
2
c
c

xn
0
x e ax

lim

n!
a n 1

tx

f ( x)dx

E E ( X / Y ) E ( X )

Multivariate Distributions

E E (Y / X ) E (Y )

PX ( x ) p ( x, y )

V ( X / Y ) E ( X 2 / Y y) E ( X / Y y)

PY ( y ) p( x, y )

V ( X ) E V ( X / Y ) V E ( X / Y )

b d

V (Y ) E V (Y / X ) V E (Y / X )

a c

M X ,Y (t1 , t2 ) E (et1 X t2Y )

P (a X b, c Y d ) f ( x, y )dydx
f X ( x)

M X ,Y (t1 , 0) E (et1 X ) M X (t1 )

f ( x, y )dy

fY ( y )

M X ,Y (t1 , t2 )t1 t2 0
t1

E (Y )

M X ,Y (t1 , t2 )t1 t2 0
t2

f ( x, y )dx

P( X x / Y y ) p( x / y )
f ( x / Y y) f ( x / y)

p ( x, y )
pY ( y )

f ( x, y )
fY ( y )

E ( X / Y y ) x p ( x / y )
E ( X / Y y)

M X ,Y (t1 , t2 )t1 t2 0
t1t2

p ( x / y ) p X ( x)

x f ( x / y )dx

p ( y / x) pY ( y )

f ( x / y ) f X ( x)

f ( x)
P ( A)

f ( y / x ) fY ( y )
f ( x , y ) f X ( x ) f Y ( y )

E ( X Y ) E ( X ) E (Y )
Cov( X , Y ) E ( XY ) E ( X ) E (Y )
Cov( X , X ) V ( X )
Cov(Y , Y ) V (Y )
Cov( X , k ) 0
Cov(aX , bY ) abCov( X , Y )
Cov(W X , Y Z ) Cov(W , Y ) Cov(W , Z )
Cov( X , Y ) Cov( X , Z )
V ( X Y ) V ( X ) V (Y ) 2Cov( X , Y )
V (aX bY c ) a 2V ( X ) b 2V (Y ) 2abCov( X , Y )
V (aX bY cZ ) a 2V ( X ) b 2V (Y ) c 2V ( Z )
2 abCov ( X , Y ) acCov ( X , Z ) bcCov(Y , Z )
Correlation Coefficient: XY

E ( XY )

Independence:

f ( x / A)

E( X )

Cov( X , Y )
V ( X ) V (Y )

E ( XY ) E ( X ) E (Y )
Cov( X , Y ) 0
V ( X Y ) V ( X ) V (Y )
M X Y (t ) M X (t ) M Y (t )
Sums of Distributions
Single
Bernoulli
Binomial
Poisson
Geometric
Negative Binomial
Normal
Exponential
Gamma
Chi-Square

Multiple
Binomial
Binomial
Poisson
Negative Binomial
Negative Binomial
Normal
Gamma
Gammas
Chi-Square

If X,Y have joint distribution which is uniform,

1
then pdf is
Area of R

E ( X ) ( x d ) f x ( x) dx (u d ) 1 Fx (u )
u

Area of A
then P(A) =
Area of R

1 Fx ( x) dx
d

Bivariate Normal
Cov( X , Y )
( X E ( X ))
V (X )

E (Y / X ) E (Y )

V (Y / X ) V (Y ) (1 2 XY )
Bernoulli = Binomial with only 1 trial
Coefficient of Variation =

Memoryless
Exponential, Uniform, Geometric
Combine Normals
Add/Subtract Means
Add variances
Deductibles and Policy Limits
0
xd

Deductible: Y

xd
xd

E ( X ) ( x d ) f x ( x )dx 1 F ( x) dx
x
u

Policy Limit: Y

xu
xu

E ( X ) xf x ( x)dx u f x ( x)dx xf x ( x)dx u 1 Fx (u ) dx

u

1 Fx ( x ) dx
0

Deductibles and Policy Limits