What are the shortcomings of the geometric Brownian motion for stock prices that underlies the Black-Scholes option
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What are the shortcomings of the geometric Brownian motion for stock prices that underlies the Black-Scholes option pricing model? For each deficiency, state what modification to the model is likely to provide an improvement.
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The Black Scholes model assumes stock prices to follow a geometric Brownian motion which leads to shortcomings resulting from the simplifications made ...View the full answer
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