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(Extra Credit) Suppose that you are given with a stochastic process for a firm?s value such that

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10. (Extra Credit) Suppose that you are given with a stochastic process for a firm?s value such that;where, is a random noise with standard normal distribution, coefficients a, b, c, are all positive constants. Answer the following questions;a) Is this process Geometric Brownian Motion? Why or why not?;b) Is the firm?s value distributed with log-normal distribution? If so, what are the mean and standard deviation of the process? (Hint: apply Ito?s lemma).;Additional Requirements;Min Pages: 1;Level of Detail: Show all work

 

Paper#21160 | Written in 18-Jul-2015

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