CHAPTER 3
Statistics: A Review
This chapter reviews some of the fundamental elements of statistics that will be used in the chapters related to the measurement of trading and credit risk. Readers who are familiar with elementary statistics can turn directly to Chapter 4. This chapter discusses
1. The case of a single random variable, with its expected value and standard deviation
2. The case of two random variables with a joint probability distribution, marginal probabilities, covariance, and correlation
3. The Gaussian or normal probability distribution
4. The lognormal distribution
RANDOM VARIABLES: DISCRETE AND CONTINUOUS ...
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