The price of a share is ($ 40). If (mu=0.1) and (sigma^{2}=0.16) per year, find a (95

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The price of a share is \(\$ 40\). If \(\mu=0.1\) and \(\sigma^{2}=0.16\) per year, find a \(95 \%\) confidence interval for the price of the share after six months (i.e. an interval \(I_{0.95}=(\underline{S}, \bar{S})\) so that \(\left.p\left(S \in I_{0.95}\right)=0.95\right)\). Hint: use that if \(Z\) is a stochastic variable with standard normal distribution, then \(p(-1.96 \leq Z \leq 1.96) \simeq\) 0.95).

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Quantitative Finance

ISBN: 9781118629956

1st Edition

Authors: Maria Cristina Mariani, Ionut Florescu

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