Suppose the underlying S follows the standard geometric Brownian motion Use the associated Fokker?Planck-equation, together with the
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Suppose the underlying S follows the standard geometric Brownian motion
Use the associated Fokker?Planck-equation, together with the definition of the probability current
to prove that the probability mass is conserved over time,
Assume that the probability density function p(S, t) is a sufficiently rapid decreasing function, which is true.
Transcribed Image Text:
dS, = µS,dt + oS,dW,. di + oS,d 'SP 15.0-(a5-) F(S,1)=uS- 2 as p(S, t),
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We start with the FokkerPlanck equation for the probability density function pSt of the standard geo...View the full answer
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