priori and empirical probability

CFA Level I Quant
#1

Pls what is the different between the two, explain with example.

#2

First, it’s “a priori” (pronounced “ah pree-o-ree”), not just “priori”.

Suppose that you were tossing a coin and wanted to determine the probability of tossing heads. The a priori estimate of the probability would likely be 0.50: there are two possible outcomes, and they’re congruent (i.e., essentially the same), so you assign equal probabilities to each. An empirical estimate of the probability involves tossing the coin a number of times – 1,000, say – tabulating the results – maybe you got 515 heads and 485 tails – and basing your estimate on those results: perhaps you conclude that P(H) = 0.515.

#3

great example

just remember empirical = formed from past data

a priori= formed using reasoning or an inspection process

#4

Thanks.

#5

Thanks.

#6

Thanks guys, I think it’s clear for me now as well.