UNR, MATH/STAT 352, Spring 2007
Time EruptionWaiting timeEruption
UNR, MATH/STAT 352, Spring 2007 Long wait Short wait
UNR, MATH/STAT 352, Spring 2007 Long eruption Short eruption
UNR, MATH/STAT 352, Spring 2007 Short eruption, short wait Long eruption, long wait
UNR, MATH/STAT 352, Spring 2007 Conclusion: The longer the eruption, the longer the wait for the next one
UNR, MATH/STAT 352, Spring 2007
Carbon Dioxide CO 2 Temperature Carbon dioxide concentration is related to the Earth temperature
UNR, MATH/STAT 352, Spring Carbon dioxide concentration is related to the Earth temperature
UNR, MATH/STAT 352, Spring Possible solution: Control CO 2 to affect temperature
UNR, MATH/STAT 352, Spring 2007 ? Each asset can be described by the (possible) distribution of future values.
UNR, MATH/STAT 352, Spring 2007 Asset A Asset B Portfolio (A+B) ?
UNR, MATH/STAT 352, Spring 2007 Some processes (and random variables) are connected We can measure (or control) one process to predict (or control) another Thus, we need to a) manipulate with several random variables b) establish connections among random variables
UNR, MATH/STAT 352, Spring 2007 Experiment: tossing two dice, face of each die is a random variable with possible values {1,2,3,4,5,6} Sample space (1,1) (2,1) (1,2) (2,2) (1,3) (2,3) (1,4) (2,4) (1,5) (2,5) (1,6) (2,6) (3,1)(3,2)(3,3)(3,4)(3,5)(3,6) (4,1)(4,2)(4,3)(4,4)(4,5)(4,6) (5,1)(5,2)(5,3)(5,4)(5,5)(5,6) (6,1)(6,2)(6,3)(6,4)(6,5)(6,6) Second die (2 nd random variable) First die (1 st random variable) Each outcome (n,m) has probability 1/36
UNR, MATH/STAT 352, Spring 2007 Experiment: observing two random variables X and Y Sample space Random variable Y Random variable X Probabilities can be calculated using density f ( x,y )