Gamma distribution

  • Thread starter euler_fan
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  • #1
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Main Question or Discussion Point

On the included link, it is calculated that 5% of payouts are around $627 and 95% of payouts are at $1444. I would appreciate if someone can direct me as to how the came up with this answer.

http://www.brighton-webs.co.uk/distributions/gamma.asp" [Broken]
 
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Answers and Replies

  • #2
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First off they use "less than" and "greater than", not "equal". Those are the limits of the payouts. In general, the F(x) or CDF or Cumulative Probability function takes as an input a number x (payout) along with the distribution parameters, shape, and scale. It returns a percentage as an answer such that y percent of things (payouts) will be less than x.

Now to go the other way you need the inverse CDF function. You feed it a percentage, y, and it returns x (payout amount). Usually this is done with a tabulated chart of values or a computer/calculator function.
 

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