Page 65 - FINAL CFA I SLIDES JUNE 2019 DAY 3
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LOS 10.n: Explain the relationship between Session Unit 3:
normal and lognormal distributions and why the 10. Common Probability Distributions
lognormal distribution is used to model asset
prices, p.231/232
Lognormal, ex –right skewed and bounded from below by
zero so that it is useful for modelling asset prices
which never takes negative values.
Hence, logarithms of lognormally distributed random variables are
The natural logarithm, ln, of ex is x,
normally distributed!
