Browse CFA Level 1

Chapter 4: Probability Trees and Conditional Expectations

In this section

  • Random Variables, Expected Values, and Variances
    Explore the fundamentals of random variables, expected values, and variances through intuitive explanations, financial examples, and practical tips for CFA exam readiness.
  • Probability Trees for Scenario Analysis
    Explore how probability trees can serve as powerful scenario analysis tools by mapping out multiple stages of uncertainty, enabling complex investment and managerial decisions under different conditions.
  • Conditional Probability and Bayesian Updating
    Explore the fundamentals of conditional probability and the power of Bayesian updating in finance, covering everything from foundational formulas to real-world applications in credit risk assessment, forecasting, and investment analysis.
  • Applications of Conditional Expectations in Investments
    Explore how conditional expectations refine forecasting, inform scenario analysis, and enhance risk modeling in CFA-level investment strategies.
  • Risk-Neutral vs. Real-World Probability Measures
    Explore the difference between risk-neutral and real-world probability measures in asset pricing, with examples, diagrams, and best practices for valuation and risk management applications.
View the page source Edit the page History
Monday, March 24, 2025 Monday, January 1, 1

Important Notice: FinancialAnalystGuide.com provides supplemental CFA study materials, including mock exams, sample exam questions, and other practice resources to aid your exam preparation. These resources are not affiliated with or endorsed by the CFA Institute. CFA® and Chartered Financial Analyst® are registered trademarks owned exclusively by CFA Institute. Our content is independent, and we do not guarantee exam success. CFA Institute does not endorse, promote, or warrant the accuracy or quality of our products.

Chapter 3: Statistical Measures of Asset Returns
Chapter 5: Portfolio Mathematics