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subject 103 April 2001 Q7ii)

A

april2105

Member
Hi,

I am having trouble understanding how we get from

E[exp(sigma B_t)] to exp(0.5 sigma^2 t) using the MGF on pg 11 of the tables.

If we compare exp(sigma B_t) to M(t) do we get:

exp(sigma B_t) to equal exp(0.5 sigma^2 t^2?)?

mu=0 but how we get to the end result puzzles me!

Could someone please help?

Thanks!
 
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