Lecture #28: Calculations with Itoˆ’s Formula

follows geometric Brownian motion with drift 0.05 and volatility 0.3 so that it satisfies the stochastic di↵erential equation dXt =0.3Xt dBt +0.05Xt dt. If the price of the stock at time 2 is 30, determine the probability that the price of the stock at time 2.5 is between 30 and 33. Solution.

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