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Conditional Expectation 11/9

It is often useful to use conditional probabilities for the computation of expected values, the definition of the conditional expectation follows from the definition of conditional probability:

\begin{displaymath}\mbox{ For } \mbox{ such that } P(F)>0,\qquad E(X\vert F)=
\sum_{x_i}x_i P(x_i\vert F)\end{displaymath}

This used through the following equivalent of the law of total probability: If Fj,j=1...M is a partition of the state space $\Omega$,

\begin{displaymath}E(X)=\sum_{j=1}^M E(X\vert F_j)P(F_j)
\end{displaymath}

See the book, page 240, for the proof I gave inclass, and the craps example.



Susan Holmes
1998-12-07