PROB

Probability

Conditioning, distributions, expectation and the handful of techniques that turn most interview probability questions into one-liners.

Shared from Trading and market making
  1. 1

    Conditioning and Bayes

    Updating on evidence, why base rates dominate, and the classic traps that come from conditioning on the wrong event.

  2. 2

    Distributions

    The dozen distributions worth knowing by recall, what each one describes, and the sums you can do in your head.

  3. 3

    Expectation, variance and the big tricks

    The three moves that solve most of what you will be asked: linearity with indicators, conditioning with the tower property, and setting up a recursion when a game can repeat.

  4. 4

    Random walks and Markov chains

    Boundary problems as systems of equations, gambler’s ruin, hitting times and the pattern-waiting family.

  5. 5

    Order statistics and extremes

    Distributions of minima and maxima, expected ranges and spacings, and optimal stopping.

  6. 6

    Simulation and Monte Carlo

    Inverse transform, rejection sampling, simulating one distribution from another, and variance reduction.