What is the dimension of Δt? Is it second [s]? What are the expected return and the expected volatility? How can I calculate them for any given stock? Should I use the return and volatility values for the moment in which I need to simulate the price? Is ε a random variable | ε ∈ [0,1) with an expected value of 1/2?
- S(0): The stock price today.
- S(Δt): The stock price at a (small) time into the future.
- Δt: A small increment of time.
- μ: The expected return.
- σ: The expected volatility.
- ε: A (random) number sampled from a standard normal distribution.