DEFINITION of 'Binomial Distribution'
A probability distribution that summarizes the likelihood that a value will take one of two independent values under a given set of parameters or assumptions. The underlying assumptions of the binomial distribution are that there is only one outcome for each trial, that each trial has the same probability of success and that each trial is mutually exclusive.
BREAKING DOWN 'Binomial Distribution'
A binomial distribution summarizes the number of trials, or observations, when each trial has the same probability of attaining one particular value.
For example, flipping a coin would create a binomial distribution. This is because each trial can only take one of two values (heads or tails), each success has the same probability (i.e. the probability of flipping a head is 0.50) and the results of one trial will not influence the results of another.

Uniform Distribution
In statistics, a type of probability distribution in which all ... 
Sampling Distribution
A probability distribution of a statistic obtained through a ... 
Probability Distribution
A statistical function that describes all the possible values ... 
Sampling Error
A statistical error to which an analyst exposes a model simply ... 
NonSampling Error
A statistical error caused by human error to which a specific ... 
Analyst
A financial professional who has expertise in evaluating investments ...

Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Fundamental Analysis
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Active Trading Fundamentals
Bet Smarter With The Monte Carlo Simulation
This technique can reduce uncertainty in estimating future outcomes. 
Investing
What a Family Tradition Taught Me About Investing
We share some lessons from friends and family on saving money and planning for retirement. 
Investing
Where the Price is Right for Dividends
There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields. 
Personal Finance
How Tech Can Help with 3 Behavioral Finance Biases
Even if you’re a finance or statistics expert, you’re not immune to common decisionmaking mistakes that can negatively impact your finances. 
Investing Basics
5 Tips For Diversifying Your Portfolio
A diversified portfolio will protect you in a tough market. Get some solid tips here! 
Entrepreneurship
Identifying And Managing Business Risks
There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them. 
Forex Education
Explaining Uncovered Interest Rate Parity
Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates. 
Fundamental Analysis
Using Decision Trees In Finance
A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.

Is Colombia an emerging market economy?
Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What is the utility function and how is it calculated?
In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets lower portfolio variance?
Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >> 
When is it better to use systematic over simple random sampling?
Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>