APPENDIX B Basic Tools
In this appendix, we provide a very brief summary overview of some the main statistical tools that are mentioned in the text. There are no derivations or proofs but interested readers can access any number of text books on statistics and econometrics.
SUMMATION AND PRODUCT OPERATORS
Summation is indicated by the use of the Greek capital letter , pronounced sigma. Thus, we have
The double summation operator is also used; thus
The product operator is given by
STANDARD BROWNIAN MOTION AND THE DYNAMICS OF THE ASSET-PRICE PROCESS
A normal random variable, also termed a Gaussian random variable, with mean 0 and variance l is defined by a probability density function of the form
where
A normally distributed variable x with mean 0 and variance 1 is denoted by x → N(0,1). Given two real numbers a and b, then a + bx would be normally distributed ...
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