Key Takeaways
- A random variable is a variable whose value is unknown or a function that assigns values to each of an experiment’s outcomes.
- A random variable can be either discrete (having specific values) or continuous (any value in a continuous range).
- The use of random variables is most common in probability and statistics, where they are used to quantify outcomes of random occurrences.
- Risk analysts use random variables to estimate the probability of an adverse event occurring.
Risk analysts assign random variables to risk models when they want to estimate the probability of an adverse event occurring.
As a statistical tool, a frequency distribution provides a visual representation for the distribution of observations within a particular test.
Types of Random Variables
A random variable can be either discrete or continuous.
- Discrete random variables take on a countable number of distinct values.
- Continuous random variables can represent any value within a specified range or interval and can take on an infinite number of possible values.
Shortest bear market in S&P 500 history