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Friday, March 13, 2015

BM with drift is more visual than a GBM without drift

Now I think BM with drift is easier to deal with than GBM -- with or without drift.

For a BM with drift, the position at a future time T has a familiar normal distribution. The next increment (+ve or –ve), too, has a normal distribution.

The GBM has a asymmetric bell shape. Harder to visualize.