Model about capital price and loss underlying asset price submitted to geometric Brownian motion
Yusong Cao · Journal of Liaoning Technical University · 2013
On account of the problem that option price risk of which the underline asset follows the geometric Brownian,the problem of stock hedging through buying a put option is concerned,this paper divided the market into risky market and the risk free market,and built the process of capital operation which follows the geometric Brownian.The model reflects the realities.The problem about capital operation in risky market and the risk free market is studied.Using stochastic process knowledge,the paper obtained the expectation of the final market price of the portfolio,the probability of the final market price of the portfolio which exceeds a give threshold and the expectation of the final risk.This study is useful to prevent the risk of stock.