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  1. Nicole Seaman

    YouTube T2-9c Bayes Theorem, Three-state variable

    This explores the answer to Miller's sample question in Chapter 6 of Mathematics and Statistics for Financial Risk Management. There are three types of managers: Out-performers (MO), in-line performers (MI) and under-performers (MU). The prior probability that a manager is an outperformer is...
  2. jairamjana

    Bayes Theorem with Probability Matrix

    I came across a example question from Schweser which I solved it below. Because the question specified that the performance in one year is independent of performance in next year. The probability that an Excellent manager will outperform 3 years in a row is (70%)^3 = 34.3% . This is why I...
  3. David Harper CFA FRM

    Bayes Theorem: two approaches

    Here is a recent question I wrote to test Bayes Theorem (which has been reintroduced into the FRM) 1. Tree Approach I have typically used a (binomial) tree to visualize this sort of problem. You start the tree with the unconditional (aka, marginal) probabilities which are the probabilities...