Exercise 14.1 Suppose that S0(t) > 0 with S0(0) = 1, and it pays no dividends.

Let S∗

i (t) = Si(t)/S0(t), i = 1, 2, . . . , n, and so forth. Confirm that, for any self-financing portfolio {(t)}, the denominated value process is given by

where 

Transcribed Image Text:

n t (s)dG(s), 0