Read full paper at: http://www.scirp.org/journal/PaperInformation.aspx?PaperID=50966#.VFCbYlfHRK0 Author(s) Ferry Jaya Permana , Dharma Lesmono , Erwinna Chendra * Affiliation(s) Department of Mathematics, Universitas Katolik Parahyangan, Bandung, Indonesia . ABSTRACT Geometric Brownian Motion (GBM) is widely used to model the asset price dynamics. Option price models such as the Black-Sholes and the binomial tree models rely on the assumption that the underlying asset price dynamics follow the GBM. Modeling the asset price dynamics by using the GBM implies that the log return of assets at particular time is normally distributed. Many studies on real data in the markets showed that the GBM fails to captu...
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