Brownian motion diverges as the window shrinks, thus rendering the calculation a singular perturbation problem. Brownian motion Brownian motion or pedesis (from "leaping") is the random motion of particles suspended in a fluid (a liquid or a gas) resulting from their collision with the fast-moving molecules in the fluid. This pattern of motion typically alternates random fluctuations in a particle's position inside a fluid sub-domain with a relocation to another sub-domain. Each relocation is followed by more fluctuations within the new closed volume. This pattern describes a fluid at thermal equilibrium, defined by a given temperature. Within such fluid there exists no
Geometric Brownian motion above: formula_27. import numpy as np import pandas as pd import matplotlib.pyplot as plt mu=1 n=50 dt=0.1 x0=100 x=pd.DataFrame() np.random.seed(1) for sigma in np.arange(0.8,2,0.2): x.columns=np.arange(0.8,2,0.2) plt.plot(x) plt.legend(x.columns) plt.xlabel('t') plt.ylabel('X') plt.title('Realizations of Geometric Brownian Motion with different variances\n mu=1') plt.show() GBM can be extended to the case where there are multiple correlated price paths. Each price path follows the underlying process where the Wiener processes are correlated such that formula_31 where formula_32. For the multivariate case, this implies that Geometric Brownian motion is used to model stock prices in the Black–Scholes model and is the most widely used model of stock