Question: The variable z follows a Generalized Wiener process for the first two years, with drift rate u=1.6 p.a. and variance rate o =0.81 p.a. and

The variable z follows a Generalized Wiener process for the first

The variable z follows a Generalized Wiener process for the first two years, with drift rate u=1.6 p.a. and variance rate o =0.81 p.a. and then another Generalized Wiener Process starting in two years, with drift rate u=1.2 p.a. and variance rate o =0.49 p.a. The current value of z is 4.4. (a) What is the probability distribution of the value of z in half a year? What is the probability that this value will be lower than its current value? (b) What is the probability distribution of the value of z in 2 years? What is the probability that this value will be higher than 8.2? (c) What is the probability distribution of the value of z in the 5 years? Specify the 95% confidence interval for this value. The variable z follows a Generalized Wiener process for the first two years, with drift rate u=1.6 p.a. and variance rate o =0.81 p.a. and then another Generalized Wiener Process starting in two years, with drift rate u=1.2 p.a. and variance rate o =0.49 p.a. The current value of z is 4.4. (a) What is the probability distribution of the value of z in half a year? What is the probability that this value will be lower than its current value? (b) What is the probability distribution of the value of z in 2 years? What is the probability that this value will be higher than 8.2? (c) What is the probability distribution of the value of z in the 5 years? Specify the 95% confidence interval for this value

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