Many people believe that the daily change of price of a companys stock on the stock market
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Many people believe that the daily change of price of a company’s stock on the stock market is a random variable with mean 0 and variance σ2. That is, if Yn represents the price of the stock on the nth day, then
Yn = Yn-1 + Xn n ≥ 1
where X1, X2, ... are independent and identically distributed random variables with mean 0 and variance σ2. Suppose that the stock’s price today is 100. If σ2 = 1, what can you say about the probability that the stock’s price will exceed 105 after 10 days?
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