Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The initial price of a stock is $100. Consider the following model for the movement of astocks price: at each second the price can increase

The initial price of a stock is $100. Consider the following model for the movement of astocks price: at each second the price can increase by 0.05% with probability p or decreaseby 0.05% with probability 1 p (the probability for increase\decrease is independent ofprevious events). Approximate the probability that the stocks price will be at least $105after 1 hour, assuming 1. p = 0.51 and 2. p = 0.5. Is this model realistic?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Calculus Single Variable

Authors: Deborah Hughes Hallett, Deborah Hughes Hallet, Andrew M Gleason, William G McCallum, Daniel E Flath, Patti Frazer Lock, David O Lomen, David Lovelock,

6th Edition

1118748611, 9781118748619

More Books

Students also viewed these Mathematics questions

Question

14. Now reconcile what you answered to problem 15 with problem 13.

Answered: 1 week ago