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Describe briefly the problem raised by assuming normal

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Meanwhile, when one looks at historical data on market price movements, the distribution of the size of movements looks very much like the so-called bell curve, the normal distribution: there are more days when price changes are small than when they are big. Consequently, the evaluation and communication of variability or risk in finance often assumes that outcomes follow the normal distribution. Under that assumption, the calculation of probabilities for a certain outcome becomes a straightforward exercise (UL1).

Question:

Regarding UL1, describe briefly the problem raised by assuming normal distribution.

Reference no: EM132594523

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