Neutral and Normal frequency distribution: Difference between pages

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1.  ''Impact.''
A normal frequency distribution is a theoretical continuous, symmetrical, bell-shaped distribution function.   
Its mean, mode and median are all the same; and both the tails of the bell curve are infinitely long.


An action or policy having no effect on a measure under review, having no net effect on it, or intended to have no net effect on it.
Because of its symmetry, a normal frequency distribution can be described fully by its mean and its standard deviation.


For example, ''carbon-neutral'' or ''neutral interest rate''.
Commonly abbreviated to ''normal distribution''.




2.  ''Risk management - hedging.''
Simple normal distributions are frequently used for modelling uncertainty.  However, reality is rarely so neat and symmetrical as the normal distribution model.


A position that is considered to be hedged against changes in a market rate or price, or other market-related variable.
This can lead to spurious accuracy and a false sense of security from relying on models of that kind.


For example, ''delta neutral'' or ''vega neutral''.


== See also ==
* [[Binomial]]
* [[Fat tail]]
* [[Frequency distribution]]
* [[Kurtosis]]
* [[Leptokurtic frequency distribution]]
* [[Lognormal frequency distribution]]
* [[Mean]]
* [[Mode]]
* [[Median]]
* [[Standard deviation]]
* [[Standardised normal distribution]]
* [[Tail event]]
* [[Tail risk]]
* [[Value at risk]]


3.  ''Financial reporting.''


Financial amounts reported on an adjusted basis to remove distortions and aid comparability.
===Other links===
 
[http://www.treasurers.org/node/9214 Students: Perfect proportions, The Treasurer, July 2013]
For example, ''FX-neutral'' financial amounts.
 
 
4.  ''Valuation or policy basis.''
 
A basis of valuation or decision making that is independent of the variable mentioned.
 
For example, ''risk neutral valuation'' methods.
 
 
== See also ==
* [[Carbon-neutral]]
* [[Delta neutral]]
* [[Financial reporting]]
* [[Float neutral]]
* [[FX-neutral]]
* [[Hedging]]
* [[Impact]]
* [[Input]]
* [[Net zero]]
* [[Neutral interest rate]]
* [[Risk management]]
* [[Risk neutral valuation]]
* [[Variable]]
* [[Vega neutral]]


[[Category:The_business_context]]
[[Category:Financial_risk_management]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]

Revision as of 14:08, 16 November 2016

A normal frequency distribution is a theoretical continuous, symmetrical, bell-shaped distribution function. Its mean, mode and median are all the same; and both the tails of the bell curve are infinitely long.

Because of its symmetry, a normal frequency distribution can be described fully by its mean and its standard deviation.

Commonly abbreviated to normal distribution.


Simple normal distributions are frequently used for modelling uncertainty. However, reality is rarely so neat and symmetrical as the normal distribution model.

This can lead to spurious accuracy and a false sense of security from relying on models of that kind.


See also


Other links

Students: Perfect proportions, The Treasurer, July 2013

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