Dictionary of Insurance Terms: binomial distribution
binomial distribution
statistical function that displays the probability of determining a stated number of successes in a series of trials in which the probability of success is the same in each trial. In insurance, the binomial distribution is used to analyze certain future events. Some chance events have only two possible outcomes; the probability of occurrence p = 1 - q and the probability of nonoccurrence q = 1 - p. (Note that p + q = 1; that is to say, the probability of success plus the probability of failure is always equal to 1.) The probability of exactly x outcomes (x successes) in n independent repetitions is given by the function
