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## Hot answers tagged market-microstructure

5

First part of your question: The solution comes from solving the SDE specified in the paper and then using the moment generating function of a normal random variable. Formally, let us define the SDE specified in the paper: $$dS_u = \sigma dW_u,$$ with initial value $S_t = s$. To get the solution to the above SDE, we can integrate from $t$ to $T$ on both ...

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