MATH 3589 Lecture Notes - Lecture 6: Risk Neutral

• School: Ohio State University
• Department: Mathematics
• Course: MATH 3589
• Professor: John Holmes

Document Summary

Homework assignment #3 february 2 solutions: let ( , p) be a nite probability space. Recall that if a is an event, then the probability of a is. Show that: p(ac) = 1 p(a, if a1, a2, . , an are a set of events, then prove. This exercise asks you to compute some elementary probabilities using the de nition of probability on a nite space. The outcomes are denoted and a probability p is assigned to each so that p . P( ) = 1. (a) now a, an event, is a subset of outcomes, and p(a) is de ned as. To calculate p(ac) we use the fact that a ac = and. A ac = , so that we can divide the sum over all the elements in into two disjoint subsets and write. Since the left side is 1, we get the desired conclusion.