Expected Value of Call Option

[lostsoul]

I am not use to doing it this way and I cannot seem to get it to come out. Usually i go off of the given stock data, but in this case it is not given and they are doing parameter estimation.

Can anyone explain how they are able to come up with the .3828 and .7011 for the expected growth rate and the volatility?

The S = 35.36 is the stock price at time 0.

thanks!

 

[lostsoul]

Yikes! All that is a complete mystery to me
(perhaps you need a Wall St. help site!)
but I can tell you that, if E = Euler number
and So = 35.36, then:
E[LOG(40.71 / 35.36)] = ~.3828

But no idea where you'd get the 40.71;
it is simply the required value to yield .3828

E should just be the expected value, I don't think the Euler number applies here. The 40.71 would be the S_t or the stock at anytime T. But like you said where does that come from, that is where I am lost.

I can just plug it into a calculator and solve for S_t to get 51.8514, however that does not really help when I try to apply it to a different pproblem where I need the v and the sigma.

I think you're right I do need a wall street expert lol