Binomial Distribution

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.

Investopedia explains '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.



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