- CFA Exams
- 2022 Level I
- Study Session 2. Quantitative Methods (2)
- Reading 4. Common Probability Distributions
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Learning Outcome Statements PDF Download
| 1. Introduction and Discrete Random Variables a. define a probability distribution and compare and contrast discrete and continuous random variables and their probability functions; b. calculate and interpret probabilities for a random variable given its cumulative distribution function; | |
| 2. Probability Function a. define a probability distribution and compare and contrast discrete and continuous random variables and their probability functions; b. calculate and interpret probabilities for a random variable given its cumulative distribution function; | |
| 3. Cumulative Distribution Function a. define a probability distribution and compare and contrast discrete and continuous random variables and their probability functions; b. calculate and interpret probabilities for a random variable given its cumulative distribution function; | |
| 4. Discrete and Continuous Uniform Distribution c. describe the properties of a discrete uniform random variable, and calculate and interpret probabilities given the discrete uniform distribution function; d. describe the properties of the continuous uniform distribution, and calculate and interpret probabilities given a continuous uniform distribution; | |
| 5. Binomial Distribution e. define the properties of a Bernoulli random variable and a binomial random variable, and calculate and interpret probabilities given the binomial distribution function; | |
| 6. Normal Distribution f. explain the key properties of the normal distribution; g. contrast a multivariate distribution and a univariate distribution, and explain the role of correlation in the multivariate normal distribution; h. calculate the probability that a normally distributed random variable lies inside a given interval; | |
| 7. The Standard Normal Distribution i. explain how to standardize a random variable; j. calculate and interpret probabilities using the standard normal distribution; | |
| 8. Shortfall Risk and Roy's Safety-First Criterion k. define shortfall risk, calculate the safety-first ratio, and identify an optimal portfolio using Roy's safety-first criterion; | |
| 9. The Lognormal Distribution l. explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices; | |
| 10. Continuously Compounded Rates of Return m. calculate and interpret a continuously compounded rate of return, given a specific holding period return; | |
| 11. Student's t-, Chi-Square, and F-Distributions n. describe the properties of the Student's t-distribution, and calculate and interpret its degrees of freedom; o. describe the properties of the chi-square distribution and the F-distribution, and calculate and interpret their degrees of freedom; | |
| 12. Monte Carlo Simulation p. describe Monte Carlo simulation. |
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