Option Pricing Models Are Based on Ito Processes $Y _ { t }$

question 3

Multiple Choice

Option pricing models are based on Ito processes. Which of the following statements best describes Ito processes? Ito processes $Y _ { t }$ are

• A) A special case of Wiener processes \(W _ { t }\) .
• B) Are functions of Wiener processes: in SDE form, \(d Y ( t ) = a d t + b d W ( t )\) .
• C) Are functions of Wiener processes: in SDE form, \(d Y ( t ) = a d t + b d W ( t )\) , with the restriction that \(\alpha\) and \(b\) have to be constants.
• D) Are functions of Wiener processes: in SDE form, \(d Y ( t ) = a d t + b d W ( t )\) , with the restriction that \(\alpha\) and \(b\) have to be constants or functions of time \(t\) alone.

---

Definitions:

Optical Storage

A type of disk storage that uses lasers and lights to read and write data, such as CDs and DVDs, characterized by their high capacity and durability.

Hard Drives

Storage devices used for saving, retrieving, and holding data persistently, including your operating system, software applications, and personal files.

Input Devices

Hardware devices used to enter data or instructions into a computer or other electronic systems, such as keyboards, mice, and scanners.

Human Intervention

Human intervention is the process of human beings taking action or influencing a process, system, or activity, often to correct or improve its operation or outcome.