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Leptokurtosis is observed in many financial distributions.

It means a more ‘pointy-headed’ and ‘fat tailed’ observed distribution, compared with the distributions predicted by the normal and lognormal models.

Importantly, there is a fatter downside tail (‘left tail’) in the observed data.

In other words the observed frequency of large negative returns (or results) is greater than predicted - for example - by the lognormal model of the distribution assumed in the Black Scholes option pricing model.

Because of leptokurtosis, Value at Risk models which use a normal frequency distribution will understate the Value at Risk.

See also