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All main topics / Finance & Investment / Derivatives / Derivatives
13.When a stock price, S,  follows geometric Brownian motion with mean return m and volatility s what is the process follows by X where X = ln S.
A.dX = m dt + s dz
B.dX = (m−r) dt + s dz
C.dX = (m−s2) dt + s dz
D.dX = (m − s2/2) dt + s dz
Answer: D

This is the example in Section 14.7
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015




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