DEFINITION of 'A Priori Probability'
Probability calculated by logically examining existing information. A priori probability can most easily be described as making a conclusion based upon deductive reasoning rather than research or calculation. The largest drawback to this method of defining probabilities is that it can only be applied to a finite set of events.
INVESTOPEDIA EXPLAINS 'A Priori Probability'
Priori probabilities are most often used within the deduction method of calculating probability. This is because you must use logic to determine what outcomes of an event are possible in order to determine the number of ways these outcomes can occur.
For example, consider how the price of a share can change. Its price can increase, decrease or remain the same. Therefore, according to a priori probability, we can assume that there is a 1in3, or 33%, chance of one of the outcomes occurring (all else remaining equal).

Event Risk
1. The risk due to unforeseen events partaken by or associated ... 
Systematic Risk
The risk inherent to the entire market or entire market segment. ... 
Posterior Probability
The revised probability of an event occurring after taking into ... 
Conditional Probability
Probability of an event or outcome based on the occurrence of ... 
Beta
A measure of the volatility, or systematic risk, of a security ... 
Risk
The chance that an investment's actual return will be different ...

What is the difference between the cost of capital and the discount rate?
The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >> 
How does the market share of a few companies affect the HerfindahlHirschman Index ...
In economics and commercial law, the HerfindahlHirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >> 
What does the rule of 70 indicate about a country's future economic growth?
The rule of 70 could be used to indicate the approximate number of years that it would take a company's economic growth to ... Read Full Answer >> 
How is the rule of 70 related to the growth rate of a variable?
The rule of 70 is related to the growth rate of a variable because it uses the growth rate in its approximation of the number ... Read Full Answer >> 
What is a "linear" exposure in Value at Risk (VaR) calculation?
A linear exposure in the valueatrisk, or VaR, calculation is represented by positions in stocks, bonds, commodities or ... Read Full Answer >> 
What is the criteria for a simple random sample?
Simple random sampling is the most basic form of sampling and can be a component of more precise, more complex sampling methods. ... Read Full Answer >>

Markets
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Investing Basics
Beta: Gauging Price Fluctuations
Learn how to properly use this measure that can help you meet your criteria for risk. 
Active Trading Fundamentals
Using Logic To Examine Risk
Know your odds before you put your money on the table. 
Mutual Funds & ETFs
Understanding Volatility Measurements
How do you choose a fund with an optimal riskreward combination? We teach you about standard deviation, beta and more! 
Active Trading Fundamentals
How To Convert Value At Risk To Different Time Periods
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Mutual Funds & ETFs
Pursuing Alpha In A WellDiversified IRA
This strategy is not as complex as some investment gurus would like you to believe. 
Fundamental Analysis
A Deeper Look At Alpha
The Jensen index helps investors compare realized returns to what should've been achieved. 
Options & Futures
Financial Concepts
Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear. 
Fundamental Analysis
Calculating Future Value
Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.