CAIA Chapter 3: Statistical Foundations

a graphical representation of a frequency distribution

Future possible returns and their probabilities are referred to as ex ante or expectational return probability distributions

meaning from forwards. based on realized outcomes rathern than anticipated outcomes

is the familiar bell-shaped distribution that is also known as Gaussian distribution. The normal distribution tends to approcimate many distributions observed in nature and/or generated as the result of human actions and interactions, incl. financial retu

is the recognition of interest on interest or, more generally, earning on earnings

A computation that does not incorporate compounding

assumes that earning can instantaneously be reinvested to generate additional earnings

any compounding interval other than continuous compounding is known as discrete compounding