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Statement of the classical CLT

Question

What does the Central Limit Theorem say?

Short answer

Standardised sums of i.i.d. variables with finite variance converge in distribution to a standard normal. If X1,X2,…X_1,X_2,\dots are i.i.d. with mean μ\mu and variance σ2<∞\sigma^2<\infty, then X1+⋯+Xn−nμσn→N(0,1)\dfrac{X_1+\dots+X_n-n\mu}{\sigma\sqrt n}\to N(0,1) as n→∞n\to\infty, whatever the shape of the original distribution.

Adapted from Joshi, Denson & Downes, Quant Job Interview Questions and Answers, Q3.34, p.84; question and answer rewritten by SelfMadeQuant.com.

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