Quant, Finance, Stock Market, Data Science, Volatility.
Stock price is at St and if it travels from St to St+1 then the following equation holds true. St+1 = St + et Where et is basically random shock. So the above equation can be written as follow. dSt = St+1 — St = et et = W(t+1) — W(t) ~ N(0,1) = dWt. So our SDE is basically dSt = dWt. This says that