Definition of Probability function

Probability function

A function that assigns a probability to each and every possible outcome.

Probability density function

The probability function for a continuous random variable.

Probability distribution

Also called a probability function, a function that describes all the values that the random variable can
take and the probability associated with each.

Base probability of loss

The probability of not achieving a portfolio expected return.

Cumulative probability distribution

A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.

Normal probability distribution

A probability distribution for a continuous random variable that is forms a
symmetrical bell-shaped curve around the mean.

Probability

The relative likelihood of a particular outcome among all possible outcomes.

Utility function

A mathematical expression that assigns a value to all possible choices. In portfolio theory the
utility function expresses the preferences of economic entities with respect to perceived risk and expected return.

Probability Distribution

A list of all possible outcomes and the chance of each outcome
occurring

functional classification

a separation of costs into groups based on the similar reason for their incurrence; it includes
cost of goods sold and detailed selling and administrative
expenses

objective function

the linear mathematical equation that
states the purpose of a linear programming problem

probability distribution

a range of possible values for which each value has an assigned likelihood of occurrence

Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.

Consumption Function

The relationship between consumption demand and disposable income. More generally, it refers to the relationship between consumption demand and all factors that affect this demand.

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