Geometric Brownian Motion In subject area: Computer Science 'Geometric Brownian Motion' refers to a type of Brownian motion with linear drift and diffusion coefficients, commonly used in real option theory applications in Computer Science. AI generated definition based on: Cloud Data Centers and Cost...
In the case of geometric Brownian motion for the firm value, the equity price is given by the Black–Scholes formula. It is also important to remember that, from the econometrician's perspective, the firm value, At, is an unobserved state variable and estimating it is one of the primary ...
Diffusions are widely used in finance due to their tractability. Driftless diffusions are needed to describe ratios of asset prices under a martingale measure. We provide a simple example of a tractable driftless diffusion which also has a bounded state space. Keywords: standard Brownian motion; Bro...