Explain normal distribution model proposed by L.Bachelier
Explain normal distribution model proposed by Louis Bachelier.
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He proposed a model as a simple normal distribution, for equity prices and built on this a model for pricing the almost unheard of alternatives. His model consists of many of the seeds for later work, although lay ‘dormant’ for many, many years.
How can you utilize the traded prices?
A stock whose value is now $44.75 is growing on average by 15 percent per annum. Its volatility is 22 percent. The interest rate is 4 percent. You need to value a call option along with a strike of $45, expiring in two months’ time. So, what can you do?
Explain distribution of individual numbers or random numbers.
Explain deterministic model.
When is the close relationship breaks-down in hedging reasons?
Illustrates an example of Frechet distribution?
Illustrates an example of Modern Portfolio Theory framework?
Explain all the model and experiments of Robert Merton.
Explain the deterministic volatility in an option-pricing.
Illustrates an example to explain normal distribution of random numbers?
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