If the Stock Price Follows a Random Walk, Successive Price

question 20

Multiple Choice

If the stock price follows a random walk, successive price changes are statistically independent.If σ² is the variance of the daily price change, and there are t days until expiration, the variance of the cumulative price change is

• A)" σ 2"
• B)" (σ 2 ) × (t). "
• C)" (σ 2 )/t. "
• D)" (σ 2 ) × (t 2 ). "

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