115 CFA
File: Reading 9 - 4. The Discrete Uniform Distribution

4. The Discrete Uniform Distribution

e. define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable;

f. calculate and interpret probabilities given the discrete uniform and the binomial distribution functions;

g. construct a binomial tree to describe stock price movement;

h. calculate and interpret tracking error;

i. define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution;

What is a uniform distribution?
Uniform distribution is one which has the same probability of occurrence for all values of X. Also sometimes called a rectangular distribution.

What is a good example of a uniform distribution?
When flipping a coin, you have an equal chance of getting a heads or tails. When throwing a die you have an equal chance of getting 1-6. All outcomes are equally probable.

What is a discrete uniform distribution?
It is a distribution that has a finite number of possible outcomes and each outcome is equally likely. Like throwing a die.

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