Transforming the price of an asset like a stock, bond or commodity into a standard normal random variable is one of the most important concepts in option pricing formulas. When you do this, the data will be (more or less) distributed over a normal distribution. This allows us to calculate expected returns.
Today, Tom Sosnoff and Tony Battista are joined by Tom "TP" Preston as TP explains all of this. He shows the guys how to walk through converting assets to standard variables. Then he explains how this relates to a normal probability model and how we are able to use this when looking to calculate expected returns.
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