The disclosure relates to encoding and decoding of digital data, and in particular to lossless arithmetic encoding and decoding of digital data representing audio, image or video data. A probability density function used for lossless arithmetic encoding of digital data is controlled by employing one or more parameters that changes over the set of data to be encoded. A parametric model in the form of an envelope function describes the spread of quantization indices derived from the data in a transform domain. By transmitting the one or more parameters together with the arithmetically encoded data, a receiving decoder may decode the data by exploiting the same parametric model as used by the encoder.