Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter14:WienerProcessesandIto’sLemmaMultipleChoiceTestBank:Questions1.Avariablexstartsat10andfollowsthegeneralizedWienerprocessdx=adt+bdzwheretimeismeasuredinyears.Ifa=2andb=3whatistheexpectedvalueafter3years?A.12B.14C.16D.182.Avariablexstartsat10andfollowsthegeneralizedWienerprocessdx=adt+bdzwheretimeismeasuredinyears.Ifa=3andb=4whatisthestandarddeviationofthevaluein4years?A.4B.8C.12D.163.Avariablexstartsat10andfollowsthegeneralizedWienerprocessdx=adt+bdzIfa=3andb=4whatisthestandarddeviationofthevalueinthreemonths?A.1B.2C.3D.44.ThevarianceofaWienerprocessintimetisA.tB.tsquaredC.thesquarerootoftD.ttothepowerof45.TheprocessfollowedbyavariableXisdX=mXdt+sXdzWhatisthecoefficientofdzintheprocessforthesquareofX.A.sXB.sX2C.2sX2D.msX6.TheprocessfollowedbyavariableXisdX=mXdt+sXdzWhatisthecoefficientofdtintheprocessforthesquareofX.A.2mX2+s2X2B.2mX2C.mX2+2s2X2D.mX2+s2X27.WhichofthefollowingistruewhenthestockpricefollowsgeometricBrownianmotionA.ThefuturestockpricehasanormaldistributionB.ThefuturestockpricehasalognormaldistributionC.ThefuturestockpricehasgeometricdistributionD.Thefuturestockpricehasatruncatednormaldistribution8.IfastockpricefollowsaMarkovprocesswhichofthefollowingcouldbetrueA.Wheneverthestockpricehasgoneupforfoursuccessivedaysithasa70%chanceofgoinguponthefifthday.B.Wheneverthestockpricehasgoneupforfoursuccessivedaysthereisalmostcertaintobeacorrectiononthefifthday.C.Thewaythestockpricemovesonadayisunaffectedbyhowitmovedonthepreviousfourdays.D.Badyearsforstockpricereturnsareusuallyfollowedbygoodyears.9.AvariablexstartsatzeroandfollowsthegeneralizedWienerprocessdx=adt+bdzwheretimeismeasuredinyears.Duringthefirsttwoyearsa=3andb=4.Duringthefollowingthreeyearsa=6andb=3.Whatistheexpectedvalueofthevariableattheendof5yearsA.16B.20C.24D.3010.AvariablexstartsatzeroandfollowsthegeneralizedWienerprocessdx=adt+bdzwheretimeismeasuredinyears.Duringthefirsttwoyearsa=3andb=4.Duringthefollowingthreeyearsa=6andb=3.Whatthes...
