This problem is designed to help you appreciate the steps needed to develop a realistic model of stock price movements. First, choose a stock of your liking and plot its prices over the past year. Now, overlay the plot with stock price processes generated using the following simulated processes (five paths from each):

a) a Wiener process (dS = s*dZ)

b) a generalized Wiener process (dS = mudt + sdZ)

c) the following Ito process (dS = muSdt + sSdZ)

d) Comment on the suitability of each process what values of mu and s seem to be most appropriate for your context? (To match parameters like mu and s to stock price series in the real world, we use sophisticated techniques such as maximum likelihood estimation).

This problem is designed to help you appreciate the steps needed to develop a realistic model of stock price movements. First, choose a stock of your liking and plot its prices over the past year. Now, overlay the plot with stock price processes generated using the following simulated processes (five paths from each): a) a Wiener process (dS = s*dZ) b) a generalized Wiener process (dS = mudt + sdz) c) the following Ito process (dS = muSdt + sSdZ) d) Comment on the suitability of each process what values of mu and s seem to be most appropriate for your context? (To match parameters like mu and s to stock price series in the real world, we use sophisticated techniques such as maximum likelihood estimation). This problem is designed to help you appreciate the steps needed to develop a realistic model of stock price movements. First, choose a stock of your liking and plot its prices over the past year. Now, overlay the plot with stock price processes generated using the following simulated processes (five paths from each): a) a Wiener process (dS = s*dZ) b) a generalized Wiener process (dS = mudt + sdz) c) the following Ito process (dS = muSdt + sSdZ) d) Comment on the suitability of each process what values of mu and s seem to be most appropriate for your context? (To match parameters like mu and s to stock price series in the real world, we use sophisticated techniques such as maximum likelihood estimation)