Last lecture Gamma distribution. Gamma density Last lecture Bernoulli and binomial distribution Application of binomial distriubiton.

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Presentation transcript:

Last lecture Gamma distribution

Gamma density

Last lecture Bernoulli and binomial distribution Application of binomial distriubiton

What do you think? Can we use a binomial distribution to model the financial market. i.e one stock price going up or down for the next T days. a)Yes b)No Yes, with some assumptions about the market. actually, this is the a building block for discrete time Black- Scholes model

If you are interested, look at