3 ms·
> log price is moving in one direction with Brown motion Isn't the point of Brownian motion to move in both directions with equal probability? Why would it mov
by zaik 3y ago
> log price is moving in one direction with Brown motion
Isn't the point of Brownian motion to move in both directions with equal probability? Why would it move to minus infinity?
- penteract 3y agoI'd read "moving in one direction with Brown motion" to mean Brownian motion plus a linear term. If margin trading causes you to lose the asset, its value goes to zero, hence log of that could be said to be negative infinity. (I'm not endorsing or disputing the conclusion of the comment).