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2.A variable x starts at 10 and follows the generalized Wiener process
dx = a dt + b dz
where time is measured in years. If a = 3 and b =4 what is the standard deviation of the value in 4 years?
A.4
B.8
C.12
D.16
dx = a dt + b dz
where time is measured in years. If a = 3 and b =4 what is the standard deviation of the value in 4 years?
A.4
B.8
C.12
D.16
Answer: B
The variance per year is 42 or 16. The variance over four years is 16×4 = 64. The standard deviation is .
The variance per year is 42 or 16. The variance over four years is 16×4 = 64. The standard deviation is .
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015