A risk manager would like to simulate the price of a stock using the discretized GBM, whereSt+t = St + μStt +ptStt

with μ and  denote, respectively, the stock annual mean return and annual volatility. The datasuggest that the weekly mean return on the stock is 0.3% and the weekly volatility is 3%. Assuminga weekly time step of t = 1/52 (in terms of annual units), what is the appropriate estimate of μ?

Answer rating: 100% (QA)

The discretized GBM model for the price of a stock is giv... View the full answer