This simulates the behavior of prices of stocks or other commodities, in a model
sometimes called "geometric brownian motion". The transition from the
price at one time to the next is

Price(t) = Price(t-1) * exp(mu + 0.5 * sigma * Z)
where ** mu = "drift" **, ** sigma = "volatility" **
and Z is the value of a (0,1)-normal random variable.
The choice of ** seed ** (and other data) completely determines
the rest, so everything that happens is ** reproducible.**

** Note:** There are certainly many possible
variations on the formula above, and apparently varying possible
conventions or usages concerning the symbols. I am told by people who
know better than I that there is reason to write, instead,

Price(t) = Price(t-1) * exp((mu-sigma^2/2) + sigma * Z)
But this is not what the applet does, for better or for worse.

© 1997-2004
, Paul Garrett ... [* garrett@math.umn.edu
*]
The University of
Minnesota explicitly requires that I state that *"The views and
opinions expressed in this page are strictly those of the page
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by the University of Minnesota."*