Probability measure
In mathematics, a probability measure is a real-valued function defined on a set of events in a probability
space that satisfies measure properties such as countable additivity.[1] The difference between a probability
measure and the more general notion of measure (which includes concepts like area or volume) is that a
probability measure must assign value 1 to the entire probability space.
Intuitively, the additivity property says that the probability assigned to the union of two disjoint events by
the measure should be the sum of the probabilities of the events; for example, the value assigned to "1 or 2"
in a throw of a dice should be the sum of the values assigned to "1" and "2".
Probability measures have applications in diverse fields, from physics to finance and biology.
Definition
The requirements for a set function to be a
probability measure on a probability space are that:
must return results in the unit interval
returning for the empty set and for the
entire space.
must satisfy the countable additivity
property that for all countable collections
of pairwise disjoint sets: A probability measure mapping the probability
space for events to the unit interval.
For example, given three elements 1, 2 and 3 with probabilities and the value assigned to
is as in the diagram on the right.
The conditional probability based on the intersection of events defined as:
satisfies the probability measure requirements so long as is not zero.[2]
Probability measures are distinct from the more general notion of fuzzy measures in which there is no
requirement that the fuzzy values sum up to and the additive property is replaced by an order relation
based on set inclusion.
Example applications
Market measures which assign probabilities to
financial market spaces based on actual market
movements are examples of probability measures
which are of interest in mathematical finance; for
example, in the pricing of financial derivatives.[5] For
instance, a risk-neutral measure is a probability
measure which assumes that the current value of assets
is the expected value of the future payoff taken with
respect to that same risk neutral measure (i.e. calculated
using the corresponding risk neutral density function),
and discounted at the risk-free rate. If there is a unique
probability measure that must be used to price assets in
a market, then the market is called a complete In many cases, statistical physics uses probability
market.[6] measures, but not all measures it uses are
probability measures.[3][4]
Not all measures that intuitively represent chance or
likelihood are probability measures. For instance,
although the fundamental concept of a system in statistical mechanics is a measure space, such measures are
not always probability measures.[3] In general, in statistical physics, if we consider sentences of the form
"the probability of a system S assuming state A is p" the geometry of the system does not always lead to the
definition of a probability measure under congruence, although it may do so in the case of systems with just
one degree of freedom.[4]
Probability measures are also used in mathematical biology.[7] For instance, in comparative sequence
analysis a probability measure may be defined for the likelihood that a variant may be permissible for an
amino acid in a sequence.[8]
Ultrafilters can be understood as -valued probability measures, allowing for many intuitive proofs
based upon measures. For instance, Hindman's Theorem can be proven from the further investigation of
these measures, and their convolution in particular.
See also
Borel measure – Measure defined on all open sets of a topological space
Fuzzy measure – theory of generalized measures in which the additive property is replaced
by the weaker property of monotonicity
Haar measure – Left-invariant (or right-invariant) measure on locally compact topological
group
Lebesgue measure – Concept of area in any dimension
Martingale measure – Probability measure
Set function – Function from sets to numbers
References
1. An introduction to measure-theoretic probability by George G. Roussas 2004 ISBN 0-12-
599022-7 page 47 (https://books.google.com/books?id=J8ZRgCNS-wcC&pg=PA47)
2. Probability, Random Processes, and Ergodic Properties by Robert M. Gray 2009 ISBN 1-
4419-1089-1 page 163 (https://books.google.com/books?id=x-VbL8mZWl8C&pg=PA163)
3. A course in mathematics for students of physics, Volume 2 by Paul Bamberg, Shlomo
Sternberg 1991 ISBN 0-521-40650-1 page 802 (https://books.google.com/books?id=eSmC4
qQ0SCAC&pg=PA802)
4. The concept of probability in statistical physics by Yair M. Guttmann 1999 ISBN 0-521-
62128-3 page 149 (https://books.google.com/books?id=Q1AUhivGmyUC&pg=PA149)
5. Quantitative methods in derivatives pricing by Domingo Tavella 2002 ISBN 0-471-39447-5
page 11 (https://books.google.com/books?id=dHIMulKy8dYC&pg=PA11)
6. Irreversible decisions under uncertainty by Svetlana I. Boyarchenko, Serge Levendorskiĭ
2007 ISBN 3-540-73745-6 page 11 (https://books.google.com/books?id=lpsrP5mQG_QC&p
g=PA11)
7. Mathematical Methods in Biology by J. David Logan, William R. Wolesensky 2009 ISBN 0-
470-52587-8 page 195 (https://books.google.com/books?id=6GGyquH8kLcC&pg=PA195)
8. Discovering biomolecular mechanisms with computational biology by Frank Eisenhaber
2006 ISBN 0-387-34527-2 page 127 (https://books.google.com/books?id=Pygg7cIZTwIC&p
g=PA127)
Further reading
Billingsley, Patrick (1995). Probability and Measure. John Wiley. ISBN 0-471-00710-2.
Ash, Robert B.; Doléans-Dade, Catherine A. (1999). Probability & Measure Theory.
Academic Press. ISBN 0-12-065202-1.
External links
Media related to Probability measure at Wikimedia Commons
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