I have the following : a sequence of security returns and their probabilities
e.g.
Security Returns / Probability of Event :
10% Return with 50% probability
-5% Return with 10% probability
3% return with 10% probability
15% return with 10% probability
I can calculate the mean and the std deviation of the above i.e. E[X] and sqrt
of E[X^2] - E^2[X] where E[X] is the sum of probabilities and returns.
Given that I have the mean and the std. deviation , I can model the
distribution
as normal and do further analysis.
But is there a way of better fitting a distribution - to take the tails into
account - how would I fit the distribution and model(graph) the probability
distribution in R
And how would I do a monte-carlo for use in simulation that would generate the
appropriate distribution
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