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FRM - Schweser topic 11
Characteristics of probability distributions
5
Finance
Professional
04/11/2010
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Term
What are the first and second movements of a distribution?
 Definition

Mean is 1st movement

Variance is 2nd movement
Term
What's the formula for calculating variance?
 Definition
Var(X) = E[(X - µ)2]   = E(X2) - [E(X)]2
Term
Whats the formula for Chebyshev's Inequality?
 Definition

CI states that for any set of observations regardless of the shape of the distribution, the % of the observations that lie with k standard deviations of the mean is at least:

 

1 - 1/k2 for all k > 1
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