{"id":105071,"date":"2021-01-30T16:57:01","date_gmt":"2021-01-30T11:27:01","guid":{"rendered":"https:\/\/www.vskills.in\/certification\/tutorial\/?page_id=105071"},"modified":"2024-04-12T14:28:23","modified_gmt":"2024-04-12T08:58:23","slug":"continuous-probability-distributions-6","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/continuous-probability-distributions-6\/","title":{"rendered":"Continuous Probability Distributions"},"content":{"rendered":"\n<p>The probability distribution of returns on Mercury Co. Ltd. And Zenith Co. Ltd. Is a discrete distribution because probabilities have been assigned to a finite number of specific values. In finance, probability distributions are commonly regarded as continuous, even though they may actually be discrete. In this case, probabilities are assigned to intervals between two points on a continuous&nbsp; curve. e.g. What is the probability that rate of return will fall between 25% and 50%? The Normal Distribution, a continuous probability distribution, is the most commonly used probability distribution in finance. The normal distribution resembles a bell shaped curve. It appears that stock returns, at least over short time intervals are approximately normally distributed. The following are the features of a normal distribution:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>It is completely characterized by just two parameters viz. Expected return and standard deviation of return.<\/li><li>A bell shaped distribution; it is perfectly symmetric around the expected return.<\/li><li>The probabilities for values lying within certain bands are as follows:<\/li><\/ul>\n\n\n\n<p><strong>Band&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Probability<\/strong><\/p>\n\n\n\n<p>+ 1 S.D&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 68.3 %<\/p>\n\n\n\n<p>+ 2 S.D&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 95.4 %<\/p>\n\n\n\n<p>+ 3 S.D&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 99.7 %<\/p>\n\n\n\n<p>The same can be represented graphically as follows:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-61-1.jpg\" alt=\"Image 61\" class=\"wp-image-40240\"\/><\/figure><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The probability distribution of returns on Mercury Co. Ltd. And Zenith Co. Ltd. Is a discrete distribution because probabilities have been assigned to a finite number of specific values. In finance, probability distributions are commonly regarded as continuous, even though they may actually be discrete. In this case, probabilities are assigned to intervals between two&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-105071","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Continuous Probability Distributions - Tutorial<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/continuous-probability-distributions-6\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Continuous Probability Distributions - Tutorial\" \/>\n<meta property=\"og:description\" content=\"The probability distribution of returns on Mercury Co. Ltd. And Zenith Co. Ltd. Is a discrete distribution because probabilities have been assigned to a finite number of specific values. In finance, probability distributions are commonly regarded as continuous, even though they may actually be discrete. 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