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.
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.