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The article mentions an intuitive understanding about shining a light through your real population and getting a test population.

The analogy makes sense, but it takes a few thousand words to get there :). You do some tests which “shines light” through that real population and creates some test results.

Prior knowledge of basic probability & statistics is desirable.

Without it, we might think that a positive test result gives us an 80% chance of having cancer.

Pr(X) tells us the chance of getting positive result, whether it’s a real positive in the cancer population (1%) or a false positive in the non-cancer population (99%).

If you don't know a lot about probability theory, Bayesian methods probably sounds like a scary topic. While any mathematically based topic can be taken to rather complex depths, the use of a basic Bayesian probability model in financial forecasting can help refine probability estimates using an intuitive process.

Bayesian Probability Bayesian probability's application in corporate America is highly dependent on the "degree of belief" rather than historical frequencies of identical or similar events.




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