ASM Example 15A

[jason.]

In this example, why is the mean of the distribution of \ln S(1) equal to (\alpha - \delta) (1 - .6) and not (\alpha - \delta - .5 \sigma^2)(1 - .6) ? It seems as though it should be the latter.

[Abraham Weishaus]

Already in errata.

[jason.]

Already in errata.

Thanks. I did not have the latest version of that errata. Were you drunk when you wrote that chapter? :dsmile:

However, I think the solution to 15.11 is still incorrect. The second displayed equation should read Pr\left({C(S,5) \over C(S,0) } > 100\right) = Pr\left(\ln {C(S,5) \over C(S,0) } > \ln 100 \right) = 1 - N\left({\log 100 - \bigl(7.66 - 0.5 * (3.6)^2 \bigr) 5 \over 3.6 \sqrt{5} } \right) = 1 - N(-0.16) = .5636 (that error again).