# Supposes that the price remains unchanged until a shock occurs, at which time the price is..

Let S(t) denote the price of a security at time t . A popular model for the process {S(t), t .transtutors.com/qimage/image09062014494.png” alt=” width=”> 0} supposes that the price remains unchanged until a shock occurs, at which time the price is multiplied by a random factor. If we let N(t) denote the number of shocks by time t , and let Xi denote the ith multiplicative factor, then this model supposes that

.transtutors.com/qimage/image09062014495.png” alt=” width=”>

Where.transtutors.com/qimage/image09062014496.png” alt=” width=”> is equal to 1 when N(t) = 0. Suppose that the Xi are independent exponential random variables with rate ?; that {N(t), t .transtutors.com/qimage/image09062014494.png” alt=” width=”> 0} is a Poisson process with rate ?; that {N(t), t .transtutors.com/qimage/image09062014494.png” alt=” width=”> 0} is independent of the Xi ; and that S(0) = s.

(a) Find E[S(t)].

(b) Find E[S2(t)].

##### Our Essay Format
• Times New Roman, 12 pt
• 1 Inch Margins
• Double/ Single Spacing
• 275/ 550 Words Per Page
• MLA/ APA/ Turabian/ Chicago style, etc

A standard double-spaced page contains 275 words

##### Free Features
• Hiring a preferred expert
• Bibliography & cover page
• Revisions within 14-30 days
• 24/7 customer support ## Team of Professional Essay Writers

With our essay service, you'll find an essay writer for any task. Their rating is based on previous customer reviews and successful orders. Before you hire a writer, you can familiarize yourself with their track record in detail.