This episode provides an overview of probability theory as it applies to finance, particularly in understanding financial crises like the 2007 global crisis and the Great Depression. The speaker, Professor Robert Shiller, introduces fundamental statistical concepts such as return, expected value, variance, covariance, and correlation, explaining how these are used to quantify investment performance and risk. A key focus is the assumption of independence in financial models and how its breakdown, coupled with the prevalence of fat-tailed distributions rather than normal distributions, means that extreme market events previously considered highly improbable, like the 1987 stock market crash, can and do occur, challenging traditional Value at Risk (VaR) calculations and leading to new approaches such as CoVaR. The lecture uses historical stock market data, including Apple's performance, to illustrate these concepts, highlighting the complexity and unpredictability of financial markets