2 a Why is the Ito calculus suitable for analyzing GBM (Geometric Brown motion)? b i) What...

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2 a Why is the Ito calculus suitable for analyzing GBM (Geometric Brown motion)?

b i) What are the advantages of using Ito calculus in this application?

ii) What are the disadvantages? Any limitations?

3 GBM: Let Y be a normal N(0, 1) function, then the process Xt=Y p

t is continuous, and is marginally distributed as a normal N(0, t).

Is Xt a Brownian motion? Explain.

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Applied Probabilistic Calculus For Financial Engineering An Introduction Using R

ISBN: 9781119387619

1st Edition

Authors: Bertram K. C. Chan

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Question Posted: Oct 28, 2024 08:01 AM

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2 a Why is the Ito calculus suitable for analyzing GBM (Geometric Brown motion)? b i) What...

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Applied Probabilistic Calculus For Financial Engineering An Introduction Using R

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