DEFINITION of 'LogNormal Distribution'
A statistical distribution of random variables which have a normally distributed logarithm. Lognormal distributions can model a random variable X where log(X) is normally distributed.
These distributions, under multiplication and division, are selfreplicating. That is to say, multiplying or dividing lognormal random variables will result in lognormal distributions.
BREAKING DOWN 'LogNormal Distribution'
For example, lognormal distributions can model certain instances, such as the change in price distribution of a stock, or commodity positions. This is because the time series creates random variables. By taking the natural log of each of the random variables, the resulting set of numbers will be lognormally distributed. Other uses include survival rates of cancer patients or failure rates in product tests.

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