Skip to content

deltadecay/DiffEqFinancial_GBM_issue

Folders and files

NameName
Last commit message
Last commit date

Latest commit

 

History

7 Commits
 
 
 
 
 
 
 
 
 
 

Repository files navigation

Error in Geometric Brownian Motion problem?

There may be an error in the implmentation of GeometricBrownianMotionProblem in DiffEqFinancial.jl

Tested With julia 1.9.3 and DiffEqFinancial v2.5.0.

The proposed fix included below:

doc doc"""

``dx = μ x dt + σ x dW_t``

"""
function GeometricBrownianMotionProblem(μ, σ, u0, tspan; kwargs...)
    f = function (u, p, t)
        μ * u
    end
    g = function (u, p, t)
        σ * u
    end
    SDEProblem{false}(f, g, u0, tspan; kwargs...)
end

The analytical expected value of a GBM is (for any t):

E[x_t] = u0 * exp(μ * t)

Included in file issue.jl is a demo which simulates a stock price process with risk free rate 3% and starting value 100. After one year (T=1.0) the mean of the simulated price is 100.03, but the analytical expected value is approx 103.

About

Simple demo to illustrate issue with GeometricBrownianMotionProblem in DiffEqFinancial.jl

Resources

Stars

Watchers

Forks

Releases

No releases published

Packages

 
 
 

Contributors

Languages