Some properties of probability measures Itis easy to prove the following P(¢) = 0. P(A) <1 IfAc B, then P(A) < P(B). P(A*) = 1- P(A). * P(AUB) = P(A) + P(B) — P(An B) (inclusion-exclusion principle). * P(ANB®) —P(ANB). © PUR) S Dns P(An).Properties contd. Proposition Let (9, FP) be a probability space. Then if An € F and An t A, then P(An) t P(A). Proof. The notation Ay + A, means that Ay C A.1 and U2, An = A. Define By =A), Ba = A2\Ay By = An\An—1- Thus U2? , Bn = A and the events are pairwise disjoint. Using countable additivity, we have na P(A) = lim, Do P(B)). iA Also, /_, P(B)) = (An), hence we deduce that limn-+.o P(An) = P(A). aDefining probabilities on a finite or countable space For a finite or countable sample space 2, we can take the c-algebra = F = 2”. Note that 2° is always a o-algebra. © We have ¢ € 2%, © If A€ 2°, then A C @ and hence A® C 2. Hence A? € 2%. © If An, 7 > 1 be a sequence of subset of 9, then U2, An C @ and hence also in 2°. The probability measure P on 9 is characterized by its values on the singletons w € 2 i.e. by using p. = P({w}), w €Random VariableRandom Variable Definition (Random Variable) Let (®, F, P) be a probability space. A random variable is a real-valued function X defined on 9 such that for every Borel subset B of R the subset {w : X(w) € B} € F. Example Let Q = {H, T} and F = {4,9,H, T}. Suppose X(H) = 1 and X(T) = 1. Then for some Borel set B {H} ifteB {T} ifoeB o if01¢B Q if01eB X~"(B) = {w : X(w) € BE =Random variable example Example Let 2 = {1,2,3,4} and F = {4,9 {1}, {2,3,4}}. Is X(w) = 1+ wis arandom variable with respect to the -algebra F? Here X is not a random variable since X-"({5}) = 4 ¢ F.Lebesgue IntegralExpectation and conditional expectation Definition (Expectation) For a random variable defined on the probability space (0, FP) the expectation is defined by the Lebesgue integral EX [ XaP. a Properties E(X + Y) = E(X) +E(Y) (Linearity). If X > 0, then E(X) > 0 (Positivity). If his a convex function, then h(EX) < E(h(X)) (Jensen Inequality). E(J4) = F(A) .