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Statistics (133)
STAB22H3 (130)
Ken Butler (11)
Chapter 16

STAB22 - Chapter 16 (Highly Detailed) textbook notes, Summer 2012, Butler

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University of Toronto Scarborough
Ken Butler

CHAPTER 16RANDOM VARIABLES WHERE ARE WE GOINGrandom variableused to model probability of outcomes helps us discuss aboutpredict random behaviour MAIN TEXT 1 exinsurance company offers death and disability policy pays 10000 when you die pays 5000 when you are permanently disabled charges 50yr for having this benefit Q is company likely to make profit selling this plan to ans need to know probability that clients will diebe disabled in any yr using thta actuarial info company can calc expected val that it gains from this policy WHAT IS AN ACTUARYppl who estimate likelihoodcosts of rare events in order for them to be insured req financial statistical and business skills p423EXPECTED VALUE CENTRE 1 RANDOM VARIABLEvar that has its numerical val based on outcome of random eventdenoted with X ex amt the company pays out on an individual policyNOTATION ALERTX Y Z are most common letters used for random vars CAPITAL LETTERS denote particular val has by using x ex for insuracnce company x10000 if you die this yr 5000 if disabled or 0 if neither occurs DISCRETE RANDOM VARIABLE CONTINUOUS RANDOM VARIABLErandom var st we can list all of itsrandom var st you cannot list all of its outcomesoutcomes has too manyex x10000 or 5000 or 0 are itsoutcomes for insurance company ex PROBABILITY MODEL for a random varcollection of all possible vals and probabilities that they occur at 2
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