Consider a process whose value changes every h time units; its new value being its old value
Question:
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
σ
√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.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: