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Probability distribution

• Also called a probability function, a function that describes all the values that the random variable can take and the probability associated with each.

• A model that relates probabilities to the associated outcomes.

• Is the mechanism which generates occurrences, observations, events, returns, and variability of returns or risk. A famous distribution is the Normal Distribution with its often cited bell-shaped curve. It should be noted that many other distributions have bell-shaped curve appearances but do not necessarily behave in a normal manner. There are several statistical tests to compare and differentiate between seemingly similar curves but significantly different processes. Some probability distributions are: Bernoulli, Beta, Binomial, Cauchy, Chi Square, Exponential, F, Gamma, Geometric, Lognormal, Negative Binomial, Normal, Pascal, Poisson, t and Uniform.

 
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