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Definition of 'Tree Diagram'
A diagram used in strategic decision making, valuation or probability calculations. The diagram starts at a single node, with branches emanating to additional nodes, which represent mutually exclusive decisions or events. In the diagram below, the analysis will begin at the first blank node. A decision or event will then lead to node A or B. From these secondary nodes, additional decisions or events will occur leading to the third level of nodes, until a final conclusion is reached.
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Investopedia explains 'Tree Diagram'
Using the diagram is simple once you assign the appropriate values to each node. Chance nodes, representing a possible outcome, must be assigned a probability. Decision nodes ask a question and must be followed by answer nodes, such as "yes" or "no". Often, a value will be associated with a node, such as a cost or a payout. Tree diagrams combine the probabilities, decisions, costs and payouts of a decision and provide a strategic answer.
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Search results for 'Tree Diagram'
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http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/joint-probability.asp
Illustrates the combination of probabilities and usage of a tree diagram.
Includes expected value and total probability calculations. ...
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http://www.investopedia.com/articles/financial-theory/11/decisions-trees-finance.asp
... Check out 7 Courses Finance Students Should Take.) TUTORIAL: Options Basics Decision
Tree Basics The basics of decision trees are organized as follows: An ...
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http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/probability-distributions-calculations.asp
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