# This flashcard is just one of a free flashcard set. See all flashcards!

227

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

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.

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.

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015