When a Stock Price,S,follows Geometric Brownian Motion with Mean Return

question 15

Multiple Choice

When a stock price,S,follows geometric Brownian motion with mean return m and volatility s what is the process follows by X where X = ln S.

• A) dX = m dt + s dz
• B) dX = (m−r) dt + s dz
• C) dX = (m −s2) dt + s dz
• D) dX = (m − s2/2) dt + s dz

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