Consider the portfolio C(s, t) St Assume that the dynamics of S (t) are dSt St dWt (13 70) Apply Ito 's Lemmato C(s, t) St to obtain the PDE of this portfolio as a function of Ds and dt Let be equal to the delta of the option, that is C S Comment on the relationship between the derivative with resp...

The PDE can be written as 393 Therefore if we set C ...

Consider the portfolio C(s, t) St. Assume that the dynamics of S (t) are: dSt =

Question:

Consider the C(s, t) − ∆St. Assume that the dynamics of S (t) are:
dSt = μSt + σdWt (13.70)
Apply Ito's Lemmato C(s, t) − ∆St to obtain the PDE of this as a function of Ds and dt. Let ∆ be equal to the delta of the option, that is: ∆ = ∂C/∂S. Comment on the relationship between the derivative with respect to time, theta, and the second derivative with respect to the underlying, gamma, from the perspective of an investor. Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...