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  #1  
Old 06-18-2018, 11:31 PM
RockOn RockOn is offline
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Default Continuity Correction

Hello!
Can someone please advise me as to when we should be using continuity correction and when it's OK not to in an exam situation?

Thank you!
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Old 06-19-2018, 11:09 AM
Master_of_my_domain Master_of_my_domain is offline
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Continuity correction is basically used any time you are approximating a discrete distribution by means of a continuous distribution.

So, for example, if the distribution of losses is Poisson(5) and you are trying to determine P(X>10) using the normal approximation, you would want to use the continuity correction when determining your z-score.

Just remember that depending on what you are calculating, you will have to either subtract 0.5 or add 0.5.

So, P(X>10) --> P(X>10.5) while P(X<10) --> P(X<9.5)

When the answer choices are largely dispersed, you don't have to worry about continuity correction because it will yield approximately the same answer as not using it.
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Old 06-19-2018, 09:32 PM
pershing pershing is offline
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And the Table says:

"When using the normal approximation to a discrete distribution, use the continuity correction."

(Page 2, the second paragraph from the bottom)

I guess we really don't have choice here.
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Old 06-19-2018, 11:53 PM
RockOn RockOn is offline
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Mmmm. Interesting. I've not always used continuity correction and can often get the correct answers.

Thank you for the responses. These are helpful.
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