Setup

Suppose that we are about to perform an experiment whose outcome is not predictable in advance. The set of all possible outcomes of an experiment is known as the sample space \(S\).

For example, if the experiment consists of flipping a coin, then:

\begin{equation} S = (H, T) \end{equation}

Any subset \(E\) of the sample space \(S\) is known as an event. Some examples of event include: \(E = (H)\) where \(E\) is the event that a head appears on the flip of the coin.

We can define unions and intersections between 2 or more events. The union of two events \(E \cup F\) is a new event to consist of all outcomes that are either in \(E\) or \(F\).

Probabilities Defined on Events

Consider an experiment whose sample space is \(S\). For each event \(E\) of the sample space \(S\), we assume that a number \(P(E)\) is defined and satisfies 3 conditions:

1. \(0 \le P(E) \le 1\)
2. \(P(S) = 1\)
3. For any sequence of events \(E_1, E_2, \dots\) that are mutually exclusive:

\begin{equation} P( \mathop{\cup}_{n=1}^{\infty} E_n) = \sum_{n=1}^{\infty} P(E_n) \end{equation}

Conditional Probabilities

Conditional probabilities are a powerful and useful concept. First, we are often interested in calculating probabilities and expectations when some partial information is available. Second, in calculating a desired probability or expectation, it is often extremely useful to first “condition” on some appropriate random variable.

We denote \(P(E|F)\) the conditional probability that \(E\) occurs given that \(F\) has occurred. This is valid for all events \(E\) and \(F\) that satisfy the 3 conditions above.

Recall that for any 2 events \(E\) and \(F\), the conditional probability of \(E\) given \(F\) is defined, as long as \(P(F) > 0\), by:

\begin{equation} P(E|F) = \frac{P(EF)}{P(F)} \end{equation}

If \(X\) and \(Y\) are discrete random variables, it is natural to define the conditional probability mass function of \(X\) given that \(Y = y\), by:

\begin{align} p_{X|Y}(x|y) &= P\left\{ X=x | Y=y \right\} \\
&= \frac{P(X = x, Y = y)}{P( Y = y)} \\
&= \frac{p(x,y)}{p_Y(y)} \end{align}

for all values of \(y\) such that \(P(Y = y) > 0\). Similarly, we can define \(F_{X|Y}(x|y) = \sum_{a\le x}p_{X|Y}(x|y)\).

Finally, the conditional expectation of \(X\) given that \(Y = y\) is defined by:

\begin{align} E[X|Y = y] &= \sum_{x} P\left\{ X = x | Y = y \right\} \\
&= \sum_{x} x p_{X|Y} (x|y) \end{align}

Computing Expectations by Conditioning

Let us denote by \(E[X|Y]\) that function of the random variable \(Y\) whose value at \(Y=y\) is \(E[X|Y=y]\). An extremely important property of conditional expectation is that for all random variables \(X\) and \(Y\):

\begin{equation} E[X] = E\left[ E[X|Y] \right] \end{equation}

Independent Events

Two events \(E\) and \(F\) are independent if:

\begin{equation} P(EF) = P(E) P(F) \end{equation}

This also implies that \(P(E|F) = P(E)\).

Bayes’ Formula

Let \(E\) and \(F\) be events. We may express \(E\) as \(E = EF \cup EF^c\). Since \(EF\) and \(EF^c\) are mutually exclusive, we have:

\begin{align} P(E) &= P(EF) + P(EF^c) \\
&= P(E|F)P(F) + P(E|F^c)P(F^c) \\
&= P(E|F)P(F) + P(E|F^c)\left( 1 - P(F) \right) \end{align}