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| Non - Normal Distributions |
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Questions |
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| Non-normal distribution models are used more and more in order to price financial assets. We provide some basic questions and their respective answers on non-normal distributions: |
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| (1) What is the distribution skewness when you see more returns on the left of the mean? |
| Skewness>0 |
| Skewness<0 |
| Skewness=0 |
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| (2) What is the probability of having a return lower than -2.33 standard devaitions? |
| 95% |
| 98% |
| 99% |
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| (3) What is the kurtosis of a normal distribution ? |
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| (4) Which is the less dangerous for a risk averse investor? |
| Positive skewness with kurtosis>3 |
| Negative skewness with kurtosis>3 |
| Negative skewness with kurtosis<3 |
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Answers |
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| (1) Skewness>0 |
| (2) 99% |
| (3) 3 |
| (4) Positive skewness with kurtosis>3 |
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