More about Poisson distribution and its relation to Binomial distribution

We discussed last week that the number of times an event occurs in an interval follows a Poisson distribution. For our new hurricane insurance product, we are counting events that occur in time, and the interval is one year.

Poisson distribution is a mathematical approximation for the Binomial distribution with a very large number of trials.

Poisson distribution can also be used to estimate the probabilities of a specified number of events in a given unit area. For example if we assume earthquakes occur at random in California, the number of such events measured over an interval, say a square grid or a county can be considered to follow a Poisson distribution.

Find out more details about these ideas in lesson 37. Able and Mumble also meet Lani, the paper “mathematician.”

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