Question

Poisson distribution is used for interval targets, especially when the variance increases in proportion to expected value. Discuss the examples of interval targets that were predicted in banking. Use fictitious examples if these topics are not applicable to banking.

Answer 1

• The Poisson Distribution is a tool used in probability theory statistics to predict the amount of variation from a known average rate of occurance,within a given time frame.
• It is also used to determine how much variation there will likely be from that average number of occurrences.
• To detrmine the probable maximum and minimum number of times the event will occur within the specified time frame.
• The Poisson Distribution can be practically applied to several business operations that are common for companies to engage in.
• Check for adequate customer service staffing:Calculate the average number of customer service calls per hour that require more than 10 minutes to handle .Then,calculate the Poisson Distribution to find the probable maximum number of calls per hour that might come in requiring more than ten minutes to handle.
• Use the poisson formula to evaluate whether it is financially viableto keep a store open 24 hours a day.Calculate the average number of sales made by the store during the overnight shift.Using the distribution formula,we can calculate the probable lowest number of sales that might be made during the overnight shift.
• Review and evaluate business insurance coverage.Determine the average number of losses or claims that occur each year and that are covered by the company's business insurance.Then do a Poisson probabilty calculation to determine the maximum and minimum numbers of claims that might reasonably be filed during any one year.
• This is Poissons Formula: