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Well, log-normality does not allow you to have negative earnings and companies do have negative earnings. I suggest you to download the earnings data and perform a Jarque-Bera test for normality.


well they aren't actually log-normal! if you use the terminal measure and test the last forward rate, it is log-normal. The essential point is that the drifts that make the ratio of bond prices to nuemraire a martingale are state-dependent. This state dependence destroys log-normality. You can take the real-world measure rates to be log-normal but the ...

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