Let Wt be a Wiener process. Consider the geometric process St :
St=So*e^((µ-(1/2)s^2)t+sWt)
1, calculate dSt
2, what is the"expected rate of change" of St?
3, If the exponential term in the definition of St did not contain the
((1/2)s^2)t term,what would be the dSt? What would then be the
expected change in St?
1. dSt = St (mu t + s Wt)
2. The drift rate is mu
3. dSt = St [(mu + (1/2)s^2)t t + s Wt]