According to Ito's Lemma, What Are the Three Components of the Drift

question 12

Essay

According to Ito's Lemma, what are the three components of the drift term in an asset?

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Definitions:

Causal Chain

A sequence of events where each event is the result of the previous one and causes the next, often used in legal and philosophical arguments.

Unforeseeable

Situations or events that could not have been predicted or expected with reasonable foresight.

Assumption of the Risk

Assumption of the risk is a legal doctrine whereby an individual acknowledges and accepts the known risks associated with an activity, often relieving another party of liability for harm that may result.

Liability

The state of being responsible for something, especially by law, including debts or legal obligations.