Suppose that a stock price, S, follows geometric Brownian motion with expected return and volatility dS S dt S dz What is the process followed by the variable Sn Show that Sn also follows geometric Brownian motion ...

If then and Using Its lemma This shows that foll ...

Suppose that a stock price, S, follows geometric Brownian motion with expected return and volatility :

Question:

Suppose that a stock price, S, follows geometric Brownian motion with expected return μ and volatility σ:

dS = μS dt + σS dz

What is the process followed by the variable Sn? Show that Sn also follows geometric Brownian motion.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...