Question: Consider two exchange rates X/Y and Z/Y . (For example EUR/USD and JPY/USD.) They both follow perfectly correlated geometric Brownian motions with parameters (1,1) and

Consider two exchange rates X/Y and Z/Y . (For example EUR/USD and JPY/USD.) They both follow perfectly correlated geometric Brownian motions with parameters (1,1) and (2,2). (a) The cross-exchange rate X/Z (for example EUR/JPY ) follows a standard Brownian motion (b) The cross-exchange rate X/Z (for example EUR/JPY ) follows a general Brownian motion (c) The cross-exchange rate X/Z (for example EUR/JPY ) follows a geometric Brownian motion (d) The cross-exchange rate X/Z (for example EUR/JPY ) does not follow a geometric Brownian motion

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