Tails of the Unexpected (Andrew Haldane and Benjamin Nelson)
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This reading is a part of the syllabus for FRM Part 2 Exam in the section ‘Current Issues in Financial Markets’.
The normal distribution provides a beguilingly simple description of the world. Outcomes lie symmetrically around the mean, with a probability that steadily decays. It is well-known that repeated games of chance deliver random outcomes in line with this distribution: tosses of a fair coin, sampling of coloured balls from a jam-jar, bets on a lottery number, games of paper/scissors/stone. Or have you been fooled by randomness?