11 Consider a process whose value changes every h time units its new value being its old value multiplied either by the factor e h with probability p 1 2 (1 h), or by the factor e h with probability 1 p As h goes to zero, show that this process converges to geometric Brownian motion with drift coef...

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11. Consider a process whose value changes every h time units; its new value being its old...

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11. Consider a process whose value changes every h time units; its new value being its old value multiplied either by the factor eσ

√h with probability p = 1 2 (1 + μ

√h), or by the factor e−σ

√h with probability 1 − p. As h goes to zero, show that this process converges to geometric Brownian motion with drift coefficient μ and variance parameter σ2.

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Introduction To Probability Models

ISBN: 9780080467825

9th Edition

Authors: Sheldon M Ross

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11. Consider a process whose value changes every h time units; its new value being its old...

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Introduction To Probability Models

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