Explain Poisson process in Brownian motion
Explain Poisson process in Brownian motion.
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The most significant stochastic process inside quantitative finance is Brownian motion or the Wiener process used to model continuous asset paths. The subsequent most helpful stochastic process is the Poisson process. This is used to model discontinuous jumps into an asset price or to model events like bankruptcy.
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Boeing Company is expecting to have EBIT next year of $10 million, with a standard deviation of $5 million. Boeing has $40 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $3 million annually. Boeing also has 200,000 shares of preferred stock, which pays ann
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