Mathematical Principles and Quantitative Finance · 28. février 2025

The Cauchy distribution challenges traditional financial models due to its infinite variance and heavy tails. Unlike the mean, which does not exist, the median is a more reliable measure for analyzing returns. This impacts portfolio diversification and risk models, making metrics like standard deviation ineffective. To better manage uncertainty, use the Interquartile Range (IQR) and Conditional Value at Risk (CVaR) for more robust risk assessment.