Quick Definition

Bayes' Theorem is a mathematical formula used to update the probability estimate for an event based on new evidence.

Formula

Examples

• 1In investing, Bayes' Theorem can be used to update the probability of a stock's success based on new quarterly earnings reports.
• 2In insurance, it helps in adjusting the likelihood of an event (like a car accident) occurring based on recent changes in driving behavior or conditions.
• 3In credit scoring, it can adjust the probability of a borrower defaulting based on recent financial behaviors such as new loans or payment histories.

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