Lognormal Probability Distributions
In this video of the series on probability distributions, Abdulla explains the basic characteristics of lognormal distributions and why it is used in preference to the normal distribution.
Overview
Lognormal distributions are often used in financial markets due to their allowance of negative returns and non-negative asset prices. A brief explanation and review of logs can be found below.
Key learning objectives:
Understand why logs are used in financial markets
Define the differences between a lognormal distribution and a normal distribution
Summary
Expert
Abdulla Javeri
Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.
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