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All main topics / Finance & Investment / Derivatives / Derivatives
7.Which of the following is true when the stock price follows geometric Brownian motion
A.The future stock price has a normal distribution
B.The future stock price has a lognormal distribution
C.The future stock price has  geometric distribution
D.The future stock price has a truncated normal distribution
Answer: B

Ito’s lemma show that the log of the stock price follows a generalized Wiener process. This means that the log of the stock price is normally distributed so that the stock price is lognormally distributed.

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Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015




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