11 Consider a process whose value changes every h time units its new value being its old value multiplied either by the factor e h with probability p 12 (1 h), or by the factor e h with probability 1p As h goes to zero, show that this process converges to geometric Brownian motion with drift coefficient and variance parameter 2

The Answer is in the image, click to view ...

Question: 11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor e

11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor eσ

√

h with probability p = 12

(1 + μ

√

h), or by the factor e−σ

√

h with probability 1−p. As h goes to zero, show that this process converges to geometric Brownian motion with drift coefficient μ and variance parameter σ2.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Theory Of Probability Questions!

11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor e h with probability p = 1 2 (1 + h), or by the factor e h with...

Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor e h with probability p = 1 2 (1+ h), or by the factor e h with...

Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor e h with probability p = 1 2 (1 + h), or by the factor e h with...

11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor e h with probability p = 1 2 (1 + h), or by the factor e h with...

11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor with probability , or by the factor with probability . As h goes to...

Discuss the how you would design a production system with respect to each of Askins/Standridges 9 manufacturing systems laws (p. 12-16) (pick a "production" domain (manufacturing, logistics, or...

HULE. TS is all Ividual assignment. Problem 1 (5 point): Answer the following questions. See Homework 3 - Excel for further details. Recall the Company FIX case. Particularly, FIX has 600 customers,...

Scheduling Program simulation. Write a program in C that simulates a system program. explain the process of the system 1) Your program must use some form of "visual presentation" to show, at least,...

Please write this program in C language not C++ Your program must use some form of "visual presentation" to show, at least, the following four components: A CPU A ready queue showing all the...

Problem 1 (40p) (Well-behaved preferences) Lila spends her income on two goods: food, 21, and clothing. 12. a) The price food is p1= 4 and one piece of clothing costs p2= 8 . Show geometrically...

Suppose that we will randomly select a sample of n 100 elements from a population and that we will compute the sample proportion p of these elements that fall into a category of interest. If the...

Look back at the Ford example we discussed at the beginning of the chapter. Did stockholders in Ford lose $2.7 billion as a result of the accounting changes? What is the basis for your conclusion?

17. A solid pyramid has a rectangular base of sides 15 cm by 10 cm and a height of 20 cm. It is placed inside an open cubical tank of sides 30 cm. 'The tank is then completely filled with water. If...

In Exercise 49, find the probability that at least one engine functions properly (the sum of the terms containing 0.95 4 , 0.95 3 , 0.95 2 , and 0.95 1 ). Round to the third decimal place. Data from...

Suppose that you arrive at a single-teller bank to find five other customers in the bank, one being served and the other four waiting in line. You join the end of the line. If the service times are...

If Xi, i = 1, 2, 3, are independent exponential random variables with rates i , i = 1, 2, 3, find (a) P{X1

Find, in Example 5.10, the expected time until the nth person on line leaves the line (either by entering service or departing without service).

Required information [The following information applies to the questions displayed below.] Julie paid a day care center to watch her two-year-old son while she worked as a computer programmer for a...

Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An...

Complete a horizontal analysis for Brown Company. (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Round the "percent" answers...