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Viable Distributions to Model Asset Prices

Hello all,

I have read that while using a normal distribution to fit asset returns has largely been proven incorrect, the log-normal distribution is viewed as a good alternative.

Any thoughts on other potentially good distribution candidates?

Thanks in advance,
Danny

4 responses

While not directly related, here's a study on the distribution of variance in trading volume. Perhaps it's a start: https://www.quantopian.com/posts/distribution-of-variance-in-trade-volume-is-log-normal

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Student-t

Levy distributions are fun to play with and if you are a martingale pricing theory believer or a fan of Taleb you can spend a lot of neurons learning cool stuff and maybe even gain an edge to those normally distributed guys.