Lognormal frequency distribution and Relationship banking: Difference between pages

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A lognormal distribution is one where the logarithm - for example log(X) or ln(X) - of the variable is normally distributed.  
Under a relationship banking approach, a corporate only uses a small number of banks for all its banking business and develops a close and mutually beneficial relationship with each bank.


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


A simplified illustration is set out below.
==See also==
* [[Ancillary business]]
* [[Relationship]]
* [[Share of wallet]]
* [[Transactional banking]]


A simple (non-symmetrical) lognormal distribution includes the following values:
[[Category:The_business_context]]
 
[[Category:Corporate_finance]]
0.01, 0.1, 1, 10 and 100.
[[Category:Long_term_funding]]
 
[[Category:Cash_management]]
The median - the mid-point of the distribution - being 1.
[[Category:Financial_products_and_markets]]
 
[[Category:Liquidity_management]]
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.
[[Category:Trade_finance]]
 
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 ==
* [[Frequency distribution]]
* [[Leptokurtic frequency distribution]]
* [[Lognormally distributed share returns]]
* [[Median]]
* [[Normal frequency distribution]]

Latest revision as of 14:28, 13 July 2022

Under a relationship banking approach, a corporate only uses a small number of banks for all its banking business and develops a close and mutually beneficial relationship with each bank.


See also

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