Unconditional Probability

AAA

DEFINITION of 'Unconditional Probability'

The probability that an event will occur, not contingent on any prior or related results. An unconditional probability is the independent chance that a single outcome results from a sample of possible outcomes. To find the unconditional probability of an event, sum the outcomes of the event and divide by the total number of possible outcomes.

Unconditional Probability


Also referred to as marginal probability.

INVESTOPEDIA EXPLAINS 'Unconditional Probability'

Conditional probability measures the chance of an occurrence ignoring any knowledge gained from previous or external events. Since this probability ignores new information, it remains constant. For example, let's examine a group of stocks. A stock can either be a winner, which earns a positive income, or a loser, which has a negative income. Out of five stocks, stock A and B are winners, while C, D and E are losers. What is the unconditional probability of choosing a winning stock? Since two outcomes out of a possible five will produce a winner, the unconditional probability is 40% ( 2 / 5 ).

RELATED TERMS
  1. Symmetrical Distribution

    A situation in which the values of variables occur at regular ...
  2. Default Probability

    The degree of likelihood that the borrower of a loan or debt ...
  3. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  4. A Priori Probability

    Probability calculated by logically examining existing information. ...
  5. Value At Risk - VaR

    A statistical technique used to measure and quantify the level ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Fundamental Analysis

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
  2. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  3. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  4. Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.
  5. 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".
  6. 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".
  7. Fundamental Analysis

    Monte Carlo Simulation With GBM

    Learn to predict future events through a series of random trials.
  8. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...
  9. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  10. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center