LOGNORMAL MODEL FOR STOCK PRICES
the Central Limit Theorem, under mild additional conditions—for example, if logX 1 has finite variance, then logX 1 must have a normal distribution. Therefore, it is reasonable to hypothesize that the X k are lognormal, and we may write X k Dexp.˙Z k C /, where the Z k are IID standard normal. The first issue is the estimation of the ...
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