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Uploaded on Jul 25, 2008
This is a classic building block for Monte Carlos simulation: Brownian motion to model a stock price. The periodic return (note the return is expressed in continuous compounding) is a function of two components: 1. constant drift, and 2. random shock; i.e., volatility multiplied by a randomized critical z value For more great financial risk management videos, visit the Bionic Turtle website!