Compound Probability

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Dictionary Says

Definition of 'Compound Probability'

A mathematical term relating to the likeliness of two independent events occurring. The compound probability is equal to the probability of the first event multiplied by the probability of the second event. Compound probabilities are used by insurance underwriters to assess risks and assign premiums to various insurance products.

Investopedia Says

Investopedia explains 'Compound Probability'

The most basic example of compound probability is flipping a coin twice. If the probability of getting heads is 50% (.50), then the chances of getting heads twice in a row would be (.50 X .50), or .25 (25%).

As it relates to insurance, underwriters may wish to know, for example, if both members of a married couple will reach the age of 75, given their independent probabilities. Or, the underwriter may want to know the odds that two major hurricanes hit a given geographical region within a certain time frame. The results of their math will determine how much to charge for insuring people or property.  
Search results for

'Compound Probability'

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    http://financialedge.investopedia.com/financial-edge/1210/The-Lottery-Is-It-Ever-Worth-Playing.aspx
    ... like a coin toss where each and every toss, regardless of the number of tosses,
    has a one in two probability of landing ... (To learn more, see Compound Your Way ...

  • Volatility's Impact On Market Returns

    http://www.investopedia.com/articles/financial-theory/08/volatility.asp
    ... of returns around the mean, the larger the drop in the compound return. ... Their research
    tells us that higher volatility corresponds to a higher probability of a ...

  • Noble Energy Increases Growth Targets

    http://stocks.investopedia.com/stock-analysis/2011/Noble-Energy-Increases-Growth-Targets-NBL-WLL-CNX-COG-RRC1121.aspx
    ... (For more on CAGR, see Compound Annual Growth ... A well has an estimated gross mean
    resource range between 3 and 9 Tcf, along with a 60% probability of success. ...

  • Invest Without Stress

    http://www.investopedia.com/articles/basics/08/invest-without-stress.asp
    ... Let your investment compound, understanding that the plan is rooted in knowledge,
    not hype. ... to have to invest in funds that have a greater probability of going ...

  • CFA Level 1 Study Guide - Quantitative Methods - Calculating Yield ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/discounted-cash-flow-yield.asp
    ... 2.13 Basic Probability Concepts; 2.14 Joint Probability; 2.15 Advanced
    Probability Concepts; 2.16 Common Probability Distributions; ...

  • Tips For Avoiding Excessive Trading

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    ... selective when trading individual positions, and trade only the highest probability
    trades: a ... They may even compound the situation by doubling their positions. ...

  • Reinvesting Capital Gains In Leveraged Portfolios

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    ... no additional investment, but simply allowed the original investment to compound
    over a ... at the highest level of leverage has a very high probability of taking ...

  • CFA Level 1 Study Guide - Ethics and Standards - Code of Ethics ...

    http://www.investopedia.com/exam-guide/cfa-level-1/ethics-standards/code-ethics.asp
    ... 2.13 Basic Probability Concepts; 2.14 Joint Probability; 2.15 Advanced
    Probability Concepts; 2.16 Common Probability Distributions; ...

  • CFA Level 1 Study Guide - Quantitative Methods - Time Value Of ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/time-value-money-calculations.asp
    ... 2.13 Basic Probability Concepts; 2.14 Joint Probability; 2.15 Advanced
    Probability Concepts; 2.16 Common Probability Distributions; ...

  • Scalping: Small Quick Profits Can Add Up

    http://www.investopedia.com/articles/trading/05/scalping.asp
    ... limits risk - A brief exposure to the market diminishes the probability of running ...
    strict exit strategy is the key to making small profits compound into large ...

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