Skewness
Skewness refers to the degree of deviation from a symmetrical distribution, such as the normal distribution. A symmetrical distribution has identical shapes on either side of the mean. Distributions that are asymmetrical have unequal shapes on either side of the…
Unimodal Distribution – Locations of the Mean, Mode and the Median
A unimodal distribution is a distribution that has one clear peak. The values increase first, rising to a single highest point where they then start to decrease. A unimodal distribution can either be symmetrical or nonsymmetrical. A symmetrical distribution is…
Kurtosis and Skewness
Kurtosis refers to measuring the degree to which a given distribution is more or less ‘peaked’ relative to the normal distribution. The concept of kurtosis is very useful in decision-making. In this regard, we have 3 categories of distributions:
Arithmetic Mean Return Vs Geometric Mean Return
Both arithmetic return and geometric return are methods commonly used to calculate the yield on a given investment. However, the return that really matters is the geometric return, not the arithmetic return. A good understanding of the difference between the…
Introduction to Probability: Definition of Terms
Probability is a measure of the likelihood that something will happen. We usually express probabilities as percentages, from 0 (impossible to happen) to 100% (guaranteed). In fact, we can express almost any event as a probability, e.g., the likelihood that…
Defining Properties of a Probability
Defining properties of a probability refer to the rules that constitute any given probability. They are outlined below.
Stating the Probability of an Event in Terms of the Odds for and Against the Event
Odds for and against an event represent a ratio of the desired outcomes versus the field. In other words, the odds for an event refer to the ratio of the number of ways the event can occur to the number…
The Short-run and Long-run Aggregate Supply Curve
Aggregate supply refers to the total amount of goods and services that firms in an economy are both willing and able to sell at a given price level. We must differentiate between the short- and long-run aggregate supply curves. The…
CFA® Level 1 Study Notes – Derivatives
Study Session 16 Reading 48 – Derivative Markets and Instruments – LOS 48a: define a derivative and distinguish between exchange-traded and over-the-counter derivatives – LOS 48b: contrast forward commitments with contingent claims – LOS 48c: define forward contracts, futures contracts,…
