115 CFA
File: Reading 8 - 9. Bayes' Formula

9. Bayes' Formula

n. calculate and interpret an updated probability using Bayes' formula;

What is the mathematical formula for Bayes' formula?
$$P(A | B) = \frac{P(B | A) * P(A)}{P(B)}$$
- P(B) is the total probability of B

What is Bayes' formula used for? What are you trying to accomplish by using this formula?
If we want to know the probability of an event, and we already have some known information about conditional events, we can use Bayes. Bayes' formula is used when we know that the event whose probability we have just calculated (i.e., event X) has occurred, and we wish to evaluate conditional probabilities based on this fact.

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