Question: For stocks 1 and 2 S1 40 S2
For stocks 1 and 2, S1 = $40, S2 = $100, and the return correlation is 0.45. Let r = 0.08, σ1= 0.30, σ2 = 0.50, and δ1= δ2 = 0. Generate 1000 1-month prices for the two stocks. For each stock, compute the mean and standard deviation of the continuously compounded return. Also compute the return correlation.
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