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could you tell me how it will works mathematically, Share price of a company changes by increase of Rs.10 or decrease by Rs.10 with probability 0.5. The waiting time for a change to take place is exponentially distributed with expected waiting time of 2 months. What is the expected gain in holding one unit of the share for two years ?

how to use the concept of exponential distribution, I didn't get that - is there any involvement of poisson distribution or not.

Learner1
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  • Welcome to MSE. You'll get a lot more help if you show that you have made a real effort to solve the problem yourself, even if you haven't made much progress. What are your thoughts? What have you tried? How far could you get? Where are you stuck? This question will likely be closed if you don't add more context. Please respond by editing the question body. Clarifications don't belong in the comments. – saulspatz Aug 09 '21 at 21:14
  • thank you , for your suggestion , I will remember these points when I ask some question. – Learner1 Aug 10 '21 at 19:53

1 Answers1

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Since there is equal probability of increase as that of decrease at each change, independent of "waiting time", the expected gain is zero over two years.

mjw
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