The Journal of the Australian Mathematical Society. Series B. Applied Mathematics

Research Article

On lognormal random variables: I-the characteristic function

Roy B. Leipnika1

a1 Mathematics Department, University of California at Santa Barbara, CA 93106, USA.

Abstract

The characteristic function of a lognormal random variable is calculated in closed form as a rapidly convergent series of Hermite functions in a logarithmic variable. The series coefficients are Nielsen numbers, defined recursively in terms of Riemann zeta functions. Divergence problems are avoided by deriving a functional differential equation, solving the equation by a de Bruijn integral transform, expanding the resulting reciprocal Gamma function kernel in a series, and then invoking a convergent termwise integration. Applications of the results and methods to the distribution of a sum of independent, not necessarily identical lognormal variables are discussed. The result is that a sum of lognormals is distributed as a sum of products of lognormal distributions. The case of two lognormal variables is outlined in some detail.

(Received July 21 1989)

(Revised February 28 1990)