Use the data to estimate the parameters

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Reference no: EM131224855

Assume that the price of IBM stock follows Ito process

where µ and σ are constant and w_tis a standard Brownian motion.

Consider the daily log returns of IBM stock in 1997. The average return and the sample standard deviation are 0.00131 and 0.02215, respectively.

Use the data to estimate the parameters µ and σ assuming that there were 252 trading days in 1997.

Reference no: EM131224855

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