In a previous entry, I discussed triangular distributions. I pointed out that they arose from the practices in Hubbard's

*How to Measure Anything. When making an estimate,*one asks for the high, low and expected values of a quantity. These are used to to define a probability distribution by interpreting the results to mean that there is zero probability that the value is less than the low or greater than the high and the mode of the distribution is at the expected. You get a distribution like the figure below. A reader, Blaine Bateman, president of EAF LLC, found the elicitation question too restraining. After all, saying there is no probability of a value being below the low may call for an unreasonable level of certainty. He prefers asking the asking the question, "Give me low and high values that in which you are 90% confidence."

This raises an interesting (at least to me) mathematical question, "Can you specify the triangle given the mode and the 90% of the distribution". That is, can you specify the triangle given points

*c*and*d*rather than*a*and*b.*Blaine has a couple of solutions based a choice of addition assumptions you need to make to get a unique solution.His paper is found following this link. I recommend it, It is a nice piece of work.

## Comments (1)

1JimDensmore commented PermalinkBateman's paper rocks even on a superficial read ... I may even have to read it carefully it's so good. (Yes, that is an admission that I haven't yet given it the time it deserves.) When will we have this option in Investment Analysis? ;-)