I’m having issues with ASM 9th edition practice problem 16.7
When a Geometric Brownian motion is given to you in the form X(t)=X(0)exp(0.005t+0.1Z(t)) I thought that in order to calculate the corresponding m and v terms for the arithmetic Brownian motion we would perform
M=(0.005-(0.5)(0.1)(0.1))(t) = 0(t)
V=(0.1)(sqrt(t)) = (0.1)(sqrt(5)) = 0.2236
From there it would be easy to create a standard normal variable and find the answer.
Unfortunately for me this isn’t the value that they get in the book.
… I’m really hoping that there is just a typo (in the solution they use -0.005 and not 0.005 in their calculations)
I guess what I'm really trying to ask is that when you are given geometric Brownian motion in the form X(t)=X(0)exp(0.005t+0.1Z(t)) what are the numbers 0.005 and 0.1 equivalent to in terms of alpha, delta, and sigma.
… I understand this isn’t clear for anyone who doesn’t have the manual, but if you have the manual and still don’t understand what I’m asking then please feel free to ask for more clarification.
Thanks in advance
When a Geometric Brownian motion is given to you in the form X(t)=X(0)exp(0.005t+0.1Z(t)) I thought that in order to calculate the corresponding m and v terms for the arithmetic Brownian motion we would perform
M=(0.005-(0.5)(0.1)(0.1))(t) = 0(t)
V=(0.1)(sqrt(t)) = (0.1)(sqrt(5)) = 0.2236
From there it would be easy to create a standard normal variable and find the answer.
Unfortunately for me this isn’t the value that they get in the book.
… I’m really hoping that there is just a typo (in the solution they use -0.005 and not 0.005 in their calculations)
I guess what I'm really trying to ask is that when you are given geometric Brownian motion in the form X(t)=X(0)exp(0.005t+0.1Z(t)) what are the numbers 0.005 and 0.1 equivalent to in terms of alpha, delta, and sigma.
… I understand this isn’t clear for anyone who doesn’t have the manual, but if you have the manual and still don’t understand what I’m asking then please feel free to ask for more clarification.
Thanks in advance
Geometric Brownian Motion
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