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...
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...
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...
This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
By continuing to use this site, you are consenting to our use of cookies.