What is the 'Binomial Distribution'
The binomial distribution is 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, or independent of each other.
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. The binomial distribution determines the probability of observing a specified number of successful outcomes in a specified number of trials. The expected value, or mean, of a binomial distribution is calculated by multiplying the number of trials by the probability of successes. For example, the expected value of the number of heads in 100 trials is 50, or (100 * 0.5).Bernoulli Trial
The binomial distribution is the sum of a series of multiple independent and identically distributed Bernoulli trials. In a Bernoulli trial, the experiment is said to be random and could only have two possible outcomes: success or failure. For example, flipping a coin is considered to be a Bernoulli trial; each trial can only take one of two values (heads or tails), each success has the same probability (the probability of flipping a head is 0.5) and the results of one trial do not influence the results of another.
Binomial Distribution Example
The binomial distribution is calculated by multiplying the probability of success raised to the power of the number of successes and the probability of failure raised to the power of the difference between the number of successes and number of trials. Then, multiply the product by the combination between the number of trials and the number of successes.
For example, assume that casino created a new game in which participants are able to place bets on the number of heads or tails in a specified number of coin flips. Assume a participant wants to place a $10 bet that there would be exactly six heads in 20 coin flips. The participant wants to calculate the probability of this occurring, and therefore, he uses the calculation for the binomial distribution. The probability was calculated as: (20! / (6! * (20  6)!)) * (0.50)^(6) * (1  0.50) ^ (20  6). Consequently, the probability of exactly six heads occurring in 20 coin flips is 0.037, or 3.7%. The expected value was 10 heads in this case, wo the participant made a poor bet.

Probability Distribution
A statistical function that describes all the possible values ... 
Multinomial Distribution
A distribution that shows the likelihood of the possible results ... 
Phase 3
The final phase of clinical trials for an experimental new drug, ... 
Binomial Option Pricing Model
An options valuation method developed by Cox, et al, in 1979. ... 
Clinical Trials
A study of human volunteers that evaluates the safety and efficacy ... 
Down Transition Probability
The probability that an asset's value will decline in one period's ...

Trading
Basics Of The Binomial Distribution
Despite the fancysounding name, you already understand the Binomial Distribution, and you can use it to make money. Ready? Read on. 
Trading
Breaking Down The Binomial Model To Value An Option
Find out how to carve your way into this valuation model niche. 
Investing
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Investing
What's a Trial Balance?
A trial balance is a worksheet listing the debit or credit balances of all the ledger accounts for an entity. Under accounting theory, the total of all the debits must equal the total of all ... 
Investing
Scenario Analysis Provides Glimpse Of Portfolio Potential
This statistical method estimates how far a stock might fall in a worstcase scenario. 
Investing
Examples To Understand The Binomial Option Pricing Model
Binomial option pricing model, based on risk neutral valuation, offers a unique alternative to BlackScholes. Here are detailed examples with calculations using Binomial model and explanation ... 
Investing
Using Decision Trees In Finance
These decisionmaking tools play an integral role in corporate finance and economic forecasting. 
Investing
Juno’s Cancer Drug Trial Back On, Stock Flies (JUNO)
Juno Therapeutics shares are surging after the FDA announced it can resume trials of its leukemia treatment. 
Investing
Understanding the Accounting Cycle
An accounting cycle consists of the traditional procedures performed to record business events and transactions in a company’s accounting records. 
Investing
Monte Carlo Simulation With GBM
Learn to predict future events through a series of random trials.

What does it mean when a drug is in clinical trials and how long does it take to ...
Consider the fact that most drugs take years to get through the clinical trial process before investing in cuttingedge pharmaceutical ... Read Answer >> 
What's the difference between a trial balance and an adjusted trial balance?
See the difference between a trial balance and an adjusted trial balance, and understand the importance of making the appropriate ... Read Answer >> 
What's the difference between a trial balance and a balance sheet?
Discover what is included in a trial balance and a balance sheet, and learn about what sets these two accounting reports ... Read Answer >> 
What is the best software for calculating trial balances?
Learn why a detailed trial balance report is crucial to any business and why standalone software may provide better results ... Read Answer >> 
What is the average return on equity for a company in the electronics sector?
Learn about the BlackScholes option pricing model and the binomial options model, and understand the advantages of the binomial ... Read Answer >>