medium · FRM Part 1 Quantitative Analysis
How does the mean of a lognormal distribution compare to the mean of its associated normal distribution (X = e^Y where Y is the log-variable)?
- The lognormal mean is lower than the normal mean because outcomes are bounded below by zero.
- There is no defined mathematical relationship linking the two distributions' means.
- The two means are identical once the variance term is properly accounted for.
- The lognormal mean is higher due to the impact of variance in the exponent.
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