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A. Lösungspaket
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E. Bausteine
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NEW QUESTION: 2
If and are the expected rate of return and volatility of an asset whose prices are log-normally distributed, and a random drawing from a standard normal distribution, we can simulate the asset's returns using the expressions:
A. - .
B. - + .
C. + .
D. / .
Answer: C
Explanation:
Explanation
A standard model for representing asset returns in finance is the Geometric Brownian Motion process, and returns according to this model can be estimated by the expression given in Choice 'b'. Note that prices according to this model are log-normally distributed, and returns are normally distributed.
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