A company's cash position, measured in millions of dollars, follows a generalized Wiener process with a drift

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A company's cash position, measured in millions of dollars, follows a generalized Wiener process with a drift rate of 0.1 per month and a variance rate of 0.16 per month. The initial cash position is 2.0.

(a) What are the probability distributions of the cash position after 1 month, 6 months, and 1 year?

(b) What are the probabilities of a negative cash position at the end of 6 months and 1 year?

(c) At what time in the future is the probability of a negative cash position greatest?

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Options Futures And Other Derivatives

ISBN: 9780273759072

8th Global Edition

Authors: John Hull

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Question Posted: Oct 21, 2024 09:01 AM

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A company's cash position, measured in millions of dollars, follows a generalized Wiener process with a drift

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