Exercise 18 2 4 The Monte Carlo method for Ito processes in Fig 18 6 may not be the most ideal theoretically Consider the geometric Brownian motion dX X dt dW Assume that you have access to a perfect random number generator for normal distribution Find a theoretically better algorithm to generate sample paths for X

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Question: Exercise 18.2.4 The Monte Carlo method for Ito processes in Fig. 18.6 may not be the most ideal theoretically. Consider the geometric Brownian motion dX/X=

Exercise 18.2.4 The Monte Carlo method for Ito processes in Fig. 18.6 may not be the most ideal theoretically. Consider the geometric Brownian motion dX/X=

μdt +σ dW. Assume that you have access to a perfect random-number generator for normal distribution. Find a theoretically better algorithm to generate sample paths for X.

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