I'm having a hard time recognizing when to add or subtract .5v^2 (v = volatility) to the dt term of a Brownian Motion function. I know to go from Geo BM to Arithmetic BM you need to subtract, but when do I know when I'll need to use Geo or Arithmetic BM to solve a problem?
I've been out of the study game for about two years and I use to have a general rule of thumb for this but I have since forgotten it. Any help?
I've been out of the study game for about two years and I use to have a general rule of thumb for this but I have since forgotten it. Any help?
GBM Conversions
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