Volatility & Normal Distribution – Varsity by Zerodha

[vj_kc96]

Hey Guys,

I am unable to put this exponential function in my excel 2016 sheet. I get an function EXP.DIST() - which return me a error. I have following 2 question -

• Why do we have to calculate it by exponential returns? When we have done all the calculation in Log returns?
• Is it the best approach for calculating the Upper/Lower Range of any asset?

Thanks,
Vijay

[Karthik]

@vj_kc96

am unable to put this exponential function in my excel 2016 sheet. I get an function EXP.DIST() - which return me a error. I have following 2 question -

Can you try the ‘=exp()’ function? The exp.dist gives the exponential distribution, which we dont need.

@vj_kc96

Why do we have to calculate it by exponential returns? When we have done all the calculation in Log returns?

We need to convert the log returns to regular returns and this can be done by using the exponential function. You dont have to do this if you have calculated the returns using the normal way i.e =(today’a value/y’day value)-1

@vj_kc96

Is it the best approach for calculating the Upper/Lower Range of any asset?

I’m not sure if this is the best, but if you are convinced the returns of a stock or an index is normally distributed, then yes this is one of the better techniques.