... Chapter 1
Introduction to Probability Theory
1.1 The Binomial Asset Pricing Model
The binomial asset pricing model provides a powerful tool to understand arbitrage pricing theory
and probability theory. ... removed in the
Cantor set construction of Example 3.2.
CHAPTER 1. Introduction to Probability Theory
35
In addition to tossing a coin, another common random expe...
... F
1
⊗F
2
,
1
×
2
)
is called product probability space.
An introduction to probability theory
Christel Geiss and Stefan Geiss
February 19, 2004
20 CHAPTER 1. PROBABILITY SPACES
One can prove that
(F
1
⊗ ... A
n
2
)
:=
n
k=1
1
(A
k
1
)
2
(A
k
2
).
Definition 1.2.15 [product of probability spaces] The extension of
µ to F
1
×F
2
according to Proposition 1.2.14 is called prod...
... Introduction to Financial Econometrics
Chapter 4 Introduction to Portfolio Theory
Eric Zivot
Department of Economics
University of Washington
January 26, 2000
This version: ... simple way to solve this problem is to substitute the restriction
(7) into the function (6) and reduce the problem to a minimization over one variable.
To illustrate, use the restriction (7) to solv...
... corresponds to exactly
one of the outcomes of the random variable
¯
X, so it is natural to assign probability
1/8 to each of these. We assign probability 0 to the other 16 outcomes. In each
case, the probability ... up heads with probability
p, and tails with probability q. Now suppose that this coin is tossed twice. Using
a frequency interpretation of probability, it is re...
... particles, such as photons and protons. It turns out that
experiments have shown that certain types of elementary particles exhibit behavior
14
W. Feller, Introduction to Probability Theory and Its ... 1.2 (Coin Tossing) As we have noted, our intuition suggests that the
probability of obtaining a head on a single toss of a coin is 1/2. To have the
computer toss a coin, we can ask...
... 1.2 (Coin Tossing) As we have noted, our intuition suggests that the
probability of obtaining a head on a single toss of a c oin is 1/2. To have the
computer toss a coin, we can ask it to pick ... early problems of probability might well have
been suggested by gamblers’ exp eriences .
It is natural for anyone trying to understand probability theory to try simple
experiments by...