Common Probability Distributions

CFA® Exam Level 1

This course introduces some of the discrete and continuous probability distributions most commonly used to describe the behavior of random variables.

Course Content

What is a Probability Distribution

Discrete Vs. Continuous Random Variable

Cumulative Distribution Function

Discrete Uniform Random Variable

Bernoulli and Binomial Distribution

Stock Price Movement Using a Binomial Tree

Tracking Error and Tracking Risk

Continuous Uniform Distribution

Normal Distribution

Univariate Vs. Multivariate Distribution

Confidence Intervals for a Normal Distribution

Standard Normal Distribution

Calculating Probabilities Using Standard Normal Distribution

Safety-first Ratio

Lognormal Distribution and Stock Prices

Discretely Compounded Rate of Return

Continuously Compounded Rate of Return

Option Pricing Using Monte Carlo Simulation

Historical Simulation Vs Monte Carlo Simulation