Let S t , 0 t T be a Geometric Brownian Motion (GBM) random variable
Question:
Let St, 0 ≤ t ≤ T be a Geometric Brownian Motion (GBM) random variable with drift μ and volatility parameter σ. Suppose S0 = 1 and σ2/2 = μ. What is the mean of log ST ? What is the mean of ST itself? Is this sensible?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 66% (3 reviews)
Given that St follows a Geometric Brownian Motion GBM with drift and volatility parameter and S0 1 w...View the full answer
Answered By
Nyron Beeput
I am an active educator and professional tutor with substantial experience in Biology and General Science. The past two years I have been tutoring online intensively with high school and college students. I have been teaching for four years and this experience has helped me to hone skills such as patience, dedication and flexibility. I work at the pace of my students and ensure that they understand.
My method of using real life examples that my students can relate to has helped them grasp concepts more readily. I also help students learn how to apply their knowledge and they appreciate that very much.
4.00+
1+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
The magnetic field along the z-axis for a current loop of radius R with N loops carrying a current I, in the x-y plane, as shown below, is given by Ho NIR 2(R+22)3/2* What would be the magnitude of...
-
6) A cruise ship is traveling north with a velocity of 12 m/s. The ocean current pushes the ship east at 4.7 m/s. Determine the resultant velocity of the ship.
-
Furan is oxidized by bromine in ethanol to give 2,5 dihydro, but when oxidized by potassium permanganate, what does it give?
-
Reading material Raymond Frost, Alexa K. Fox & Judy Strauss (2019). Product: The Online Offer. E-Marketing , 9, 206 - 228. Raymond Frost, Alexa K. Fox & Judy Strauss (2019). Price: The Online Value....
-
Translate into dollars the balance sheet of Wyoming Leather Goods Spanish subsidiary. When Wyoming Leather Goods acquired the foreign subsidiary, a euro was worth $1.07. The current exchange rate is...
-
A steam power plant operates on an ideal reheat- regenerative Rankine cycle with one reheater and two feedwater heaters, one open and one closed. Steam enters the high-pressure turbine at 15 MPa and...
-
Take the product of the perturbation velocity equation given by Eq. (17.53) by any component of the perturbation velocity. This results in an equation for \(v_{x}^{\prime} v_{y}^{\prime}\), which is...
-
The village of Fay was recently incorporated and began financial operations on July 1, 2018, the beginning of its fiscal year. The following transactions occurred during this first fiscal year from...
-
Question 1 of 42\ Use the following T-Account for "Income Taxes Payable," a liability for income tax that a company owes to the government, to solve for how much the company paid in cash taxes over...
-
(a) Write a program to test the hypothesis that stock prices are up just as likely as down from one trading day to the next. Test that hypothesis on a database of stock prices of your choice. (b)...
-
If Z is distributed as N(0, 1), how is X = 3+6Z distributed? How is S = e x distributed? What is the mean and variance of S?
-
On January 1, 2019, Otano Ltd. had cash and share capital of 60,000,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2019, it purchased for cash...
-
Consider the model proposed in Subrahmanyam [1575] and presented in Sect. 10.2. In the setting of Proposition 10.4, suppose that all the \(N\) informed traders are risk neutral, in the sense that \(a...
-
Consider an exchange economy with two goods, two agents and two possible states of the world. The preference relation of with \(x_{n}^{i}(\omega)\) denoting the quantity of good \(n=1,2\) consumed by...
-
Draw up D. Male's statement of financial position as at 30 June 2016 from the following items: Capital 16,300 Equipment 6,800 Accounts payable 8,200 Inventory 7,200 Accounts receivable 6,300 Cash at...
-
Four investment alternatives (A, B, C, and D) are under consideration. The present worth (PW) for each alternative is $187,500, $300,000, $225,000, and $262,500. The payback periods (PP) for the...
-
Describe the construction of a boiler for burning pulverised coal. Explain how this design optimises the temperature, turbulence and time required for good combustion. What are the main emissions...
-
On January 1, 2009, Paul Company purchased 80% of the voting stock of Simon Company for $1,360,000 when Simon Company had retained earnings and capital stock in the amounts of $ 450,000 and...
-
The Place-Plus real estate development firm in Problem 24 is dissatisfied with the economists estimate of the probabilities of future interest rate movement, so it is considering having a financial...
-
A vertical cylinder of cross-sectional area A is fitted with a tight-fitting, frictionless piston of mass m (Fig. P19.53) (a) If n moles of an ideal gas are in the cylinder at a temperature of T,...
-
A bimetallic strip is made of two ribbons of dissimilar metals bonded together. (a) First assume the strip is originally straight. As they are heated, the metal with the greater average coefficient...
-
The Nova laser at Lawrence Livermore National Laboratory in California is used in studies of initiating controlled nuclear fusion (Section 45.4). It can deliver a power of 1.60 X 1013 W over a time...
-
Assume that the Sun is a blackbody with a temperature of 6000 Kelvin.Given this temperature, and as shown in the lectures, we know that the Sun emits approximately 7.35x10 7 W/m 2 . Based on this...
-
Part A Review Constants A parallel-plate capacitor, filled with a dielectric with K = 3.4 is fully charged and connected to a 100-V battery. The plates have area A = 4.0 m, and are separated by d 4.0...
-
A string is strung over a pulley and a block of mass 15 kg is attached. The string is plucked and you notice that the wave travels with a speed of 6.1 cm/s along the string. The mass is replaced by...
Study smarter with the SolutionInn App