Ay 1 1. (a) i.ii.Explain why the following equation is an appropriate model ofstock price behaviourdsµSdt + Sdzwhere u is the expected return for the stock and o is the stock'svolatility.=Demonstrate why this equation is not appropriate as a modelof short-term interest rate behaviour.

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Answered: 1. (a) i. ii. Explain why the following…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

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1. (a) i. ii. Explain why the following equation is an appropriate model of stock price behaviour ds µSdt + Sdz where u is the expected return for the stock and is the stock's volatility. = Demonstrate why this equation is not appropriate as a model of short-term interest rate behaviour.