INTRODUCTION

Probability distribution yields the possible outcomes

for any random event. It is also defined based on the
underlying sample space as a set of possible
outcomes of any random experiment. These settings
could be a set of real numbers or a set of vectors or
a set of any entities. It is a part of probability and
statistics.

Knowledge of probability distributions yield;

1.It enables us to epitomize and decipher data
through the implementation of some numbers.
2.It assists in locating the outcomes of experiments
in the specified context, i.e, it permits one to identify
whether the outcomes are compatible with defined
Probability vs Probability
Distribution
 Key Concepts of Probability Distribution
•Random Variable: A variable that takes on different values based
on the outcome of a random event.
• Discrete: Can take on a countable number of values.
• Continuous: Can take on an infinite number of values within
a range.
•Probability Mass Function (PMF): Used for discrete random
variables.
•Probability Density Function (PDF): Used for continuous
random variables.
•Cumulative Distribution Function (CDF): Represents the
probability that a random variable takes a value less than or
equal to a given point.
 Random Variable
Random Variable is a function that associates a real
number with an event. It means assigning a value (real
number) to every possible outcome. In more
mathematical terms, it is a function from the sample
space Ω to the real numbers. We can choose our
random variable according to our needs.
There are following two types of
Discrete Random Variables in Probability Distribution
A Discrete Random Variable can only take a
finite number of values.
Continuous Random Variable in Probability
Distribution
A Continuous Random Variable can take
infinite values in a continuous domain.
 Random Variable Example
Imagine you are tossing a fair coin. The possible
outcomes are either heads (H) or tails (T). We can
define a random variable ( X ) that represents the
outcome of the coin toss as follows:
•( X = 1 ) if the outcome is heads (H)
•( X = 0 ) if the outcome is tails (T)
 Probability Mass Function (PMF)
Definition:The PMF of a discrete random variable
gives the probability that the variable is exactly equal
to some value. It is a function that maps each
possible value of the random variable to its
corresponding probability.
Formula: 𝑃(𝑋=𝑥)=𝑝(𝑥) ,Where 𝑃(𝑋=𝑥) is the
probability that the random variable 𝑋 takes the
value x.
Example:
•For a fair six-sided die, the PMF is P(X=x)=1/6​for
x=1,2,3,4,5,6
 Probability Density Function (PDF)
•Definition:
A PDF is a function that describes the likelihood
of a continuous random variable taking on a
particular value. Unlike PMF, the value of the
PDF at any specific point is not the probability
itself but the density of probability.
•Formula:
f(x)
Where f(x) is the value of the PDF at point x
 Probability Density Function Graph
For a Normal
distribution, the
PDF has the bell-
shaped curve, and
the area under the
curve between two
points represents the
probability that the
variable falls within
that range.
 Cumulative Distribution Function (CDF)
•Definition:
•A CDF gives the probability that a random variable X
will take a value less than or equal to xxx. It is
applicable to both discrete and continuous random
variables.
•Formula:
F(x)=P(X≤x)
Where F(x) is the cumulative probability up to value x
•Example:
•For a Normal distribution, the CDF can tell us the
probability that a value is below a certain threshold
(e.g., finding the probability that a score is less than
75 in a standardized test).
 Probability
Distributions

1.Risk Assessment: Probability distributions are used to model

financial risks, such as stock price movements, interest rates,
and insurance claims. For example, the Normal distribution is
often applied in risk management to model the returns of assets.
2.Inventory Management: The Poisson distribution helps in
determining the optimal inventory levels by predicting the
demand for products or services over a fixed period.
3.Market Research: Binomial distribution is used to analyze
survey results, such as estimating the probability of customer
preferences or purchasing decisions.
Probability
Distributions
1.Discrete Probability Distributions
◦ Binomial Distribution: Describes the number of successes in a
fixed number of independent Bernoulli trials (e.g., flipping a
coin).
◦ Poisson Distribution: Represents the number of events occurring
within a fixed interval of time or space (e.g., number of emails
received in an hour).
2.Continuous Probability Distributions
◦ Normal Distribution: Also known as the Gaussian distribution, it
has a bell-shaped curve and is defined by its mean and standard
deviation.
 Binomial
Distribution
•Definition:
• The Binomial distribution is a discrete probability distribution that
models the number of successes in a fixed number of independent
and identical trials, where each trial has only two possible
outcomes: success or failure.
•Key Characteristics:
• Binary Outcomes: Each trial results in one of two possible
outcomes, commonly labeled as "success" and "failure."
• Fixed Number of Trials (n): The distribution considers a fixed
number of independent trials.
• Constant Probability (p): The probability of success (p) remains
the same across all trials.
• Independence: The outcome of any given trial does not affect the
outcome of the others.
 Features of Binomial
Distribution
The mean of a binomial distribution is calculated by multiplying the
number of trials by the probability of successes, i.e, “(np)”, and the
variance of the binomial distribution is “np (1 − p)”.
When p = 0.5, the distribution is said to be symmetric about mean,
when p > 0.5, the distribution is skewed to the left, and when p < 0.5,
the distribution is skewed to the right.
It incorporates the following properties;
1.It involves a sequence of “n identical trials”.
2.The trials are independent as the outcome of past events doesn’t
decide or affect the outcome of the present event.
3.Two outcomes are possible, “success or failure”, “win or lose” or
“gain or lose” for each outcome.
4.The probability of success on each trial, denoted by “p”, doesn’t alter
from trial to trial.
 Applications of Binomial
Distribution
1.Quality Control:
Used to determine the probability of finding a certain number of
defective products in a batch during quality inspections.
2.Medical Studies:
Estimating the probability of a specific number of patients
responding to a treatment in clinical trials.
3.Marketing:
Predicting the success rate of a marketing campaign, such as the
number of people who will respond to a direct mail offer.
4.Election Polling:
Assessing the probability of a certain number of voters favoring a
particular candidate based on a sample of voters.
5.Genetics:
Calculating the likelihood of offspring inheriting a particular trait
based on parental genotypes.
Mathematical
Representation of Binomial
Distribution
The binomial probability can be expressed
as:

Where “x” is the success that will occur in

“n” trials under a binomial experiment.
When the probability of success and failure
is equal then the graph of binomial
distribution in that situation looks like as
follows
 Poisson distribution
•Definition:
•The Poisson distribution is a discrete probability distribution that
models the number of events
occurring within a fixed interval of time or space, given that
these events happen independently of each other and at a constant
average rate.

•Key Characteristics:
•Discrete Events: The distribution counts the number of
occurrences of an event.
•Fixed Interval: The interval can be time, space, volume, etc., and
is held constant.
•Constant Rate (λ): The average number of events (λ) in the
interval remains constant.
•Independence: The occurrence of an event in one interval does
not affect the occurrence in another.
 Features of POISSON
Distribution
Poisson Distribution is only suited in the conditions where events
occur at random points of time and space, and point of interest exists
only in the total number of occurrences of the event.
In addition to that, a few symbols that are used in Poisson distribution
are; “λ” is the rate at which an event occurs, “t” is the length of a time
interval, and X is the number of events in that time interval, then mean
(denoted by “µ”) is defined as the “λ” times length of that time
interval, “µ = λ*t”.
Some features of Poisson distribution are following;
One successful event would not affect the outcome of another
successful event.
Over a small interval, a probability of success must be equivalent to the
probability of success around a larger interval.
If the interval tends to be smaller then the probability of success
approaches zero in an interval.
 MATHEMATICAL REPRESENTATION
OF POISSON DISTRIBUTION
Poisson random variables are the
number of successes that yield from the
Poisson experiment and their
corresponding probability is known as
the Poisson distribution that can be
expressed as;

Where “X” is the Poisson random

variable, “x” is the number of successes
and the mean “µ” is the fundamental
parameter in this distribution (defined
below).
The graph of Poisson distribution is
shown below;
 APPLICATIONS OF
POISSON DISTRIBUTION
1.Telecommunications:
Modeling the number of phone calls received by a call center per
minute or hour, helping to optimize staffing and resource allocation.
2.Traffic Flow Analysis:
Estimating the number of vehicles passing through an intersection or
toll booth in a given time period, which is crucial for traffic management and
infrastructure planning.
3.Epidemiology:
Predicting the number of occurrences of rare diseases in a
population over a specific period, aiding in public health planning.
4.Queueing Theory:
Analyzing the arrival of customers at a service point (e.g.,
supermarket checkout, bank teller) to optimize service efficiency.
5.Natural Disasters:
Estimating the frequency of events like earthquakes, floods, or
wildfires in a region over a certain period, which can inform disaster
preparedness strategies.
 Distribution
Definition:
The Normal distribution, also known as the Gaussian
distribution, is a continuous probability distribution characterized
by its bell-shaped curve, which is symmetric around the mean.
Key Characteristics:
•Symmetry: The distribution is perfectly symmetrical around the
mean (μ).
•Bell-Shaped Curve: The highest point on the curve corresponds
to the mean, and the curve decreases gradually on both sides.
•Mean, Median, and Mode: In a normal distribution, these three
measures of central tendency are all equal.
•Asymptotic: The tails of the distribution curve approach the
horizontal axis but never touch it, meaning extreme values are
possible but rare.
 Features of Normal
Distribution
The normal distribution is completely described by its mean
and standard deviation, i.e., the distribution is not skewed
and does show kurtosis due to which the distribution is
symmetric and depicted as a “bell-shaped curve” when
plotted.
It has the following features:
1.The mean, median, and mode of the distribution are co-
existed.
2.The distribution curve is bell-shaped and symmetrical
across the line where “x=μ”.
3.Exactly half of the values are situated at the left of the
center and the other half at the right.
4.Under the curve, the total area is “one”.
 NORMAL
DISTRIBUTION
1.Standardized Testing:
Test scores (e.g., SAT, IQ tests) are often normally
distributed, allowing for the creation of percentile ranks and
standardized scoring.
2.Finance:
Modeling the returns on stocks and other financial
instruments, where asset returns are often assumed to be
normally distributed in risk management and option
pricing (e.g., Black-Scholes model).
3.Quality Control:
In manufacturing, the distribution of product dimensions
is assumed to be normal, which is used to set tolerance
levels and improve product quality.
 MATHEMATICAL REPRESENTATION OF
NORMAL DISTRIBUTION
It is the most common distribution in
all the probabilities and statistics and
can be used frequently in finance,
investing, science, and engineering,
the probability density function for the
normal distribution is defined as;

Where the μ and σ represent the mean

(the point of the center of the
distribution) and the standard
deviation (how to spread out the
distribution is) of the population
respectively.