Lecture 10 was all about probability theory.  I began this lecture by reintroducing the Venn Diagram and sets, and described probability of an event as the fraction of space consumed by the set in a particular Venn Diagram (however defined).  I often prefer to teach probability the “geometric way” since I think it makes it easier to explain Bayes’ theorem and the Theorem of Total Probability.  Next, I presented the three axioms of probability and associated corollaries (see the Wikipedia entry for more details – it is a good reference for this topic), talked about conditional probability, and proceeded into a geometric derivation of Bayes’  Theorem and the Theorem of Total Probability.

Unfortunately due to a recent coffee mishap, I did not have a suitable computer to use in support of this lecture.  So, I delivered my lecture the old-fashioned way (definitely a challenge!) – I used a white board with markers.  I think the lecture went ok, but perhaps it was a bit too much for my students to handle given their preparation.  But alas, the concepts are important, and over time I will figure out the best way to communicate the concepts to an IST audience.

The book of the day for this lecture was Probability for Risk Management by Hassett and Stewart (1999, ISBN: 1566983479).  This book is a key reference chosen to help future actuaries prepared for their first actuary exam, Exam-P.   This book is really good and worthwhile to have on any risk professional’s bookshelf.

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