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2.A variable x starts at 10 and follows the generalized Wiener process

dx = a dt + b dz

where time is measured in years. If a = 3 and b =4 what is the standard deviation of the value in 4 years?

A.4

B.8

C.12

D.16

dx = a dt + b dz

where time is measured in years. If a = 3 and b =4 what is the standard deviation of the value in 4 years?

A.4

B.8

C.12

D.16

Answer: B

The variance per year is 42 or 16. The variance over four years is 16×4 = 64. The standard deviation is .

The variance per year is 42 or 16. The variance over four years is 16×4 = 64. The standard deviation is .

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015