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Probability |
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Definition of ProbabilityProbabilityThe relative likelihood of a particular outcome among all possible outcomes.
Related Terms:Base probability of lossThe probability of not achieving a portfolio expected return. Cumulative probability distributionA function that shows the probability that the random variable will Normal probability distributionA probability distribution for a continuous random variable that is forms a Probability density functionThe probability function for a continuous random variable. Probability distributionAlso called a probability function, a function that describes all the values that the random variable can Probability DistributionA list of all possible outcomes and the chance of each outcome probability distributiona range of possible values for which each value has an assigned likelihood of occurrence Probability functionA function that assigns a probability to each and every possible outcome. ActuaryOne who uses statistical information to evaluate the probability of future events and prices insurance products. Binomial modelA method of pricing options or other equity derivatives in Coinsurance effectRefers to the fact that the merger of two firms decreases the probability of default on Discriminant analysisA statistical process that links the probability of default to a specified set of financial ratios. Expected returnThe return expected on a risky asset based on a probability distribution for the possible rates Expected valueThe weighted average of a probability distribution. Lapse subsidizedThis refers to the practice of some life insurance companies to offer policies which are lower in price because they have assumed a high probability that the policies will be cashed in by their owners for one reason or another before the death benefit becomes available. It is a bold and risky offer by the insurance company because sometimes the purchasers of these policies simply don't lapse them. Monte Carlo simulationAn analytical technique for solving a problem by performing a large number of trail Morbidity TablesThese are statistical tables used by life insurance companies showing the probability of disease of male and females at all ages. Mortality tablesTables of probability that individuals of various ages will die within one year. Mortality TablesThis is a statistical table used by life insurance companies showing the probability of death of male and females at all ages. Normal random variableA random variable that has a normal probability distribution. Payments patternescribes the lagged collection pattern of receivables, for instance the probability that a Random walkTheory that stock price changes from day to day are at random; the changes are independent RiskA state in which the number of possible future events exceeds the number of events that will actually occur, and some measure of probability can be attached to them. Risk-adjusted profitabilityA probability used to determine a "sure" expected value (sometimes called a Skewed distributionprobability distribution in which an unequal number of observations lie below and StochasticInvolving or containing a random variable or variables; involving Tail1) The difference between the average price in Treasury auctions and the stopout price. total expected value (for a project)the sum of the individual cash flows in a probability distribution multiplied by their related probabilities Valuation AllowanceA contra- or reduction account to deferred tax assets. Value-at-Risk model (VAR)Procedure for estimating the probability of portfolio losses exceeding some VolatilityThe probability of change
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