A portfolio consists of 100 shares each of stock A: S 0 = 60, = 8

Question:

A portfolio consists of 100 shares each of stock A: S₀ = 60, μ = 8 %, σ = 40 %; and B: S₀ = 40, μ = 3 %, σ = 20 %. Their correlation is ρ = 0.3. After 6 months what is the probability of losing money and the expected gain of the portfolio if

(a) Prices follow a Gaussian GBM model?

(b) A jump diffusion with normal jumps?

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