1. The starting point — stock price process We assume that the stock price SSS follows a geometric Brownian motion: dS = μS*dt +σS*dz where: find also: Geometric Brownian Motion of Stock Price 2. Applying Ito’s Lemma to G=ln (S) We want to find the process followed by G=ln⁡S Ito’s Lemma tells us that if S…

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