(u)PSwhere Sa(n) is the price of the security at the end of daylogn.
If the volatility of a stock is .33, find the standard deviation of:
(see the attachment for the remainder of the question).
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(u)PS where Sa(n) is the price of the security at the end of day log n.
Recall the Black Scholes model derivation.
Log of the stock price is normally distributed.
The expected value of ln (ST / S0) is (µ - σ2 / 2) x T
Hence, standard deviation of ln (ST / S0) is σ x T1/2
Here, T = 1 day = 1/365
Hence, standard deviation of ln [Sd(n) / Sd(n...
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