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I have seen people use $\mu = r_f - repo$ in GBM.

1, Why do we subtract repo from risk free rate? 2, Is the stock price still a martingale?

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  • $\begingroup$ May I know what is repo? $\endgroup$ – Idonknow Dec 19 '19 at 8:22
  • $\begingroup$ Repo rate. In a repo, the dealer sells the underlying security to investors and buys them back shortly afterwards, usually the following day, at a slightly higher price. $\endgroup$ – StupidMen Dec 20 '19 at 13:00

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