A LOGISTIC BROWNIAN MOTION WITH A PRICE OF DIVIDEND YIELDING ASSET
Journal Title: International Journal of Research in Social Sciences - Year 2012, Vol 2, Issue 2
Abstract
In this paper, we have used the idea of Onyango (2003) he used to develop a logistic equation used in natural science to develop a logistic geometric Brownian motion with a price of dividend yielding asset since in reality, assets do pay dividends to shareholders at regular intervals after a maturity period which normally after one year. We have first derived a deterministic Walrasian price-adjustment model with price of dividend yielding asset after which we have introduced the stochastic effect of noise to derive a logistic geometric Brownian motion with a unique volatility function (S,t) such that the observed option price is consistent with the price of the dividend yielding asset model.
Authors and Affiliations
D. B. Oduor and Silas N. Onyango
Keywords
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