Monte Carlo Simulation (GBM) – 9 min screencast

by David Harper, CFA, FRM, CIPM

FRM |

This is a classic building block for Monte Carlos simulation: Brownian motion to model a stock price. The periodic return (note the return is expressed in continuous compounding) is a function of two components:

• constant drift
• random shock; i.e., volatility multiplied by a randomized critical z value

Here is the screencast:

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