Considering the forward price F of a nondividend-paying stock, we have Ft, T=pt er(T t), where r
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Considering the forward price F of a nondividend-paying stock, we have Ft, T=pt er(T −t),
where r is the risk-free interest rate, which is constant, and pt is the current stock price. Suppose pt follows the geometric Brownian motion dPt = μPt dt + σPt dwt. Derive a stochastic diffusion equation for Ft, T.
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