# Tag Info

## New answers tagged finance

0 votes

### A concrete example with Arrow-Pratt coefficient of absolute risk aversion

Maybe it's easier than I thought. We know that $$\mathbb{E}[u'(1-t^*+t^*X)(X-1)]=0$$ and want to prove that for $g$ concave $$\mathbb{E}[g'(u(1-t^*+t^*X))u'(1-t^*+t^*X)(X-1)]<0.$$ This follows ...
• 656
3 votes
Accepted

### Characteristic function of a random variable by Fourier transform

I'll admit that I'm not familiar with most if not all stochastic finance terminology. So, I'll assume that $K$ and $S_{0}$ are constants. See that for $f(x)=\log(x)$, by Ito's Lemma, you get, \begin{...
• 14.1k
1 vote
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### Find conditional probability that stock return will exceed some threshold value

Your computations are correct but the conclusions ar wrong.If two events cannot occur simultaneously they are not independent but mutually exclusive, i.e. they are the null event. That event has zero ...
• 1,646
1 vote
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### Regularity and B-S equation

As mentioned in https://en.wikipedia.org/wiki/Geometric_Brownian_motion we have $$S_{t}=S_{0}\exp \left(\left(\mu -{\frac {\sigma ^{2}}{2}}\right)t+\sigma W_{t}\right).$$ So the mapping \$(\mu, \sigma)\...
• 3,621

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