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P.2 T5 Dowd study notes pg 10 confidence intervals

Thread starter #1
Hello David,

Could you please let me know which are the relevant values you plug in the equation q+1.645*se(q) to obtain the 90% confidence intrerval [0.600, 2.690]?

Many thanks.
 

David Harper CFA FRM

David Harper CFA FRM (test)
Staff member
#2
Hi @Stella.gkotsi Good question, because our current note really does not explain this adequately, sorry (cc: @Nicole Seaman including another edit for this note). So it is implementing Dowd's 3.27 ....


.... he shows the calculation. Although mine is generated in its own excel (see sheet here https://www.dropbox.com/s/cpxnh4ituxnvpd9/0204-dowd-3-27.xlsx?dl=0), as below. For Bin Width = 0.10 (ie, first column):
  • f(q) = "Probability within bin" = 1 - 94.463% - 4.505% = 1.032%
  • Per formula 3.27, Lower CI = 1.645 - 1.645*sqrt[4.505%*(1-4.505%)/1000]/1.032% = 0.600, and
  • Upper CI = 1.645 + 1.645*sqrt[4.505%*(1-4.505%)/1000]/1.032% = 2.690. I hope that's helpful!
 
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