If the stock price follows a random walk,successive price changes are statistically independent.If σ² is the variance of the daily price change,and there are t days until expiration,the variance of the cumulative price change is: A)σ² B)(σ²)× (t) C)(σ²)/t D)(σ)× (t²)

Question

Quizplus · Accepted Answer

The variance of the cumulative price change is equal to the sum of the variances of each individual price change, which is equal to (σ^2)*(t). Therefore, the correct answer is (σ²)× (t).

If the Stock Price Follows a Random Walk,successive Price Changes