Float and Lognormal frequency distribution: Difference between pages

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The term 'float' may refer to:
A lognormal distribution is one where the logarithm - for example log(X) or ln(X) - of the variable is normally distributed.  
*Timing differences;
*A company going public; or
*Exchange rates.  


Lognormal distributions have a minimum - usually 'worst case' - value, whilst having an infinitely high upside.


===== Timing differences =====
A simplified illustration is set out below.
1.


Time interval, or delay, between the start and completion of a specific phase or process that occurs along the cash flow timeline. Certain types of float can be quantified and expressed in money amounts.  Float is often a cost for banks' customers, because the customer loses use of the funds in transit, for the time they remain in transit.
A simple (non-symmetrical) lognormal distribution includes the following values:


0.01, 0.1, 1, 10 and 100.


2.
The median - the mid-point of the distribution - being 1.


The timing benefit enjoyed by insurance companies of receiving insurance premia in advance (of the period covered by the related insurance contract).
This distribution is skewed: most of the values being in the lower (left) part of the distribution, the upside being infinitely high, and the downside limit being 0.


The logs - for example to the base 10 - of these values are:


===== Going public =====
log(0.01), log(0.1), log(1), log(10) and log(100)
The initial offering for sale/listing of a company’s shares on a public exchange.


= -2, -1, 0, 1 and 2.


===== Exchange rates =====
When the parent values are lognormally distributed, the transformed (log) values follow a (symmetrical) normal distribution.
The act of removing a fixed foreign exchange rate regime and allowing a currency to be freely traded.
 
So for example the mean, mode and median of the log values above (including -2, -1, 0, 1 and 2) would all be the same, namely the middle value 0.




== See also ==
== See also ==
* [[Balance and transaction activity]]
* [[Frequency distribution]]
* [[Bank float]]
* [[Leptokurtic frequency distribution]]
* [[Clearing float]]
* [[Lognormally distributed share returns]]
* [[Collection float]]
* [[Median]]
* [[Flotation]]
* [[Normal frequency distribution]]
* [[Initial public offering ]]
* [[Primary market]]
* [[CertICM]]
 
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Revision as of 10:58, 22 August 2013

A lognormal distribution is one where the logarithm - for example log(X) or ln(X) - of the variable is normally distributed.

Lognormal distributions have a minimum - usually 'worst case' - value, whilst having an infinitely high upside.

A simplified illustration is set out below.

A simple (non-symmetrical) lognormal distribution includes the following values:

0.01, 0.1, 1, 10 and 100.

The median - the mid-point of the distribution - being 1.

This distribution is skewed: most of the values being in the lower (left) part of the distribution, the upside being infinitely high, and the downside limit being 0.

The logs - for example to the base 10 - of these values are:

log(0.01), log(0.1), log(1), log(10) and log(100)

= -2, -1, 0, 1 and 2.

When the parent values are lognormally distributed, the transformed (log) values follow a (symmetrical) normal distribution.

So for example the mean, mode and median of the log values above (including -2, -1, 0, 1 and 2) would all be the same, namely the middle value 0.


See also

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