W
withoutapaddle
Member
I don't understand pg 37...
E[S(t +dt)/S(t)] = exp(r.dt) ... ok that makes sense but..
E[S(t +dt)/S(t)]^2 only involves terms of higher order than (dt) ???
my basic maths says...
E[S(t +dt)/S(t)]^2 = exp(2.r.dt)~= 1 +2.r.dt +o{(dt)^2}
maybe i'm missing the plot?
also
E[{S(t +dt)/S(t)}^2] = q.u^2 +(1-q).d^2 where did th ln's come from.. i.e.
Var{S(t +dt)/S(t)}=q.(lnu)^2 +(1-q).(-lnu)^2 -E[S(t +dt)/S(t)]^2 ???
E[S(t +dt)/S(t)] = exp(r.dt) ... ok that makes sense but..
E[S(t +dt)/S(t)]^2 only involves terms of higher order than (dt) ???
my basic maths says...
E[S(t +dt)/S(t)]^2 = exp(2.r.dt)~= 1 +2.r.dt +o{(dt)^2}
maybe i'm missing the plot?
also
E[{S(t +dt)/S(t)}^2] = q.u^2 +(1-q).d^2 where did th ln's come from.. i.e.
Var{S(t +dt)/S(t)}=q.(lnu)^2 +(1-q).(-lnu)^2 -E[S(t +dt)/S(t)]^2 ???