If I have that the standard estimator of the volatility parameter is 0.2491, how can I estimate the drift parameter, mu, for some price paths assuming the price paths can be modeled by a risk-neutral geometric Brownian motion and the interest rate is 0? (I need to consider how the drift parameter is related to the volatility in a risk-neutral setting.)

If I have that the standard estimator of the volatility parameter is 0.2491, how can I estimate the drift parameter, mu, for some price paths assuming the price paths can be modeled by a risk-neutral geometric Brownian motion and the interest rate is 0? (I need to consider how the drift parameter is related to the volatility in a risk-neutral setting.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10MC

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