A variable x starts at zero and follows the generalized Wiener process dx = a dt + b dz
Where time is measured in years.During the first two years a=3 and b=4.During the following three years a=6 and b=3.What is the expected value of the variable at the end of 5 years
A) 16
B) 20
C) 24
D) 30

Question

Quizplus · Accepted Answer

During the first two years,the drift per year is 3 and so the total drift is 3×2 or 6.During the next three years,the drift per year is 6 and the total drift is 6×3 = 18.The total drift over the five years is 6+18 =24.Given that the variable starts at zero,its expected value at the end of the five years is therefore 24.

A Variable X Starts at Zero and Follows the Generalized