Which of the following is true when the stock price follows geometric Brownian motion
A. The future stock price has a normal distribution
B. The future stock price has a lognormal distribution
C. The future stock price has geometric distribution
D. The future stock price has a truncated normal distribution
B
Ito's lemma show that the log of the stock price follows a generalized Wiener process. This means that the log of the stock price is normally distributed so that the stock price is lognormally distributed.
You might also like to view...
With an equity-indexed annuity, what name is given to the method of crediting excess interest to the annuity?
A) the capitation method B) the indexing method C) the distribution method D) the earnings method
The objective function coefficient of an artificial variable for a minimization linear programming problem is:
A) +M. B) -M. C) 0. D) 1. E) an arbitrary value between 0 and positive infinity