What does it mean to call something a 70% shot? Probability calibration is the habit of checking that your percentages match reality over many events. Tag a hundred plays at 70% and about seventy should land. This lesson separates calibration, which compares stated chances with actual frequencies, from discrimination, which asks whether your higher numbers really hit more often. You score forecasts with the Brier score and log loss, so a confident miss costs more than a timid one. It also walks through Bayesian updating: start with a prior, convert it to odds, multiply by a likelihood ratio, convert back. A bettor needs this because a number you cannot grade is just an opinion, and testing against a price your model copied proves nothing.
Learning objectives
- Understand the methodology and why professionals test it.
- Reproduce the worked example and identify its critical assumptions.
- Apply the technique in a nonfinancial paper-research exercise.
- Distinguish a robust conclusion from a seductive but unsupported interpretation.
