The Lognormal Distribution (FRM Part 1)
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1. Context
In this swatch, we spend some time exploring a very important distribution in option pricing – the lognormal distribution. We explore it’s requirement, it’s formulation, basic properties like the probability distribution function, the mean and the variance and finally, connect it with modeling of stock prices from the perspective of option pricing. The details of the reading in which this topic appears are given below:
| Area | Quantitative Analysis |
| Reading | Distributions |
| Reference | Michael Miller, Chapter 4. Distributions In Mathematics and Statistics for Financial Risk Management, 2nd Edition, (Hoboken, NJ: John Wiley & Sons, 2013). |