I've heard it said before that the futures markets tend to have "fat tails." What exactly does this mean and how is it calculated?
Bong
Bong
Fat Tails
- Thread starter Bong Recreation
- Start date
"fat tails" - Refers to a bell curve that has more outlying events than a normal distribution.
Ex. Lets look at the probability distribution of the chances of my getting laid this weekend by an extremely hot or extremely ugly girl. Will say a girl that is a "5" is the mean.
first scenario: I am sober. I don't have the balls to talk to hot girls and I definetly not talking to ugly ones. Vey few low or high numbers(ie 2,3 or 8,9) going home with me this night.
=Standard distribution
second scenario: I am drunk as hell and saying just about anything to every girl in the bar. God only knows what I would go home with this night.
This distrubtion would have a lot of outlying events from the mean(1's and 10's)
"fat tails"(pardon the pun)
I think my friends would argue that the second scenario would actually result in more data points on one side of the mean.
Ex. Lets look at the probability distribution of the chances of my getting laid this weekend by an extremely hot or extremely ugly girl. Will say a girl that is a "5" is the mean.
first scenario: I am sober. I don't have the balls to talk to hot girls and I definetly not talking to ugly ones. Vey few low or high numbers(ie 2,3 or 8,9) going home with me this night.
=Standard distribution
second scenario: I am drunk as hell and saying just about anything to every girl in the bar. God only knows what I would go home with this night.
This distrubtion would have a lot of outlying events from the mean(1's and 10's)
"fat tails"(pardon the pun)
I think my friends would argue that the second scenario would actually result in more data points on one side of the mean.
Thanks for the info and interesting analogy.
Has anyone else noticed that when you look at the gals sitting around a bar at about 1 in the morning, all the ugly ones have gotten up and gone home.