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In reality, neither are stock prices log-normally distributed nor are returns normally distributed. More sophisticated models drop this assumption. For instance, returns are more peaked and have fatter tails than a normal distribution would suggest. In simple models, such as the Black and Scholes (1973) model, it is however assumed that the stock price ...


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Stock prices cannot be negative which means that they are not normally distributed due to the fact they cannot be negative as result of this stock prices behave similarly to exponential functions. To transform this exponential values back to a normally distributed variable, you need to take the natural logarithm, and therefore can take a lognormal value and ...


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