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3.A variable x starts at 10 and follows the generalized Wiener process

dx = a dt + b dz

If a = 3 and b =4 what is the standard deviation of the value in three months?

A.1

B.2

C.3

D.4

dx = a dt + b dz

If a = 3 and b =4 what is the standard deviation of the value in three months?

A.1

B.2

C.3

D.4

Answer: B

The variance per year is 42 or 16. The variance over three months is 16×0.25 = 4. The standard deviation is .

The variance per year is 42 or 16. The variance over three months is 16×0.25 = 4. The standard deviation is .

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015