Application of Chebyshev Inequality and Central Limit Theorem in Financial Field and Comparison of their Advantages and Disadvantages

DOI

10.2991/978-94-6463-811-0_110How to use a DOI?

Keywords

Chebyshev inequality; Central limit theorem; Financial risk management; Investment decision; Pricing of financial derivatives; Statistical estimation

Abstract

This paper discusses the application of Chebyshev inequality and Central limit theorem in the field of finance and compares their advantages and disadvantages. Through theoretical analysis and empirical research, this paper first introduces the basic principles and derivation process of the two statistical methods, and then applies them to the actual financial data analysis. In this study, the data of stock return rate is selected as a sample, which is estimated by Chebyshev inequality and central limit theorem respectively, and compared with the actual distribution. The results show that Chebyshev inequality provides a more conservative but reliable estimate when the distribution of financial data is unknown, while the central limit theorem provides a more accurate approximation when the sample size is large enough. This study provides important theoretical support and practical guidance for financial risk management, investment decision making and pricing of financial derivatives.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yulin Huang
PY  - 2025
DA  - 2025/08/14
TI  - Application of Chebyshev Inequality and Central Limit Theorem in Financial Field and Comparison of their Advantages and Disadvantages
BT  - Proceedings of the 2025 5th International Conference on Enterprise Management and Economic Development (ICEMED 2025)
PB  - Atlantis Press
SP  - 1023
EP  - 1029
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-811-0_110
DO  - 10.2991/978-94-6463-811-0_110
ID  - Huang2025
ER  -