Question
1. Suppose a stock price follows the Ito process dS = aS dt + bS dB, (1) where a, b, , are all constants non-zero
1. Suppose a stock price follows the Ito process dS = aS dt + bS dB, (1) where a, b, , are all constants non-zero constants, and , 6= 0, 1. Find F(S), a differentiable function of the stock price, such that dF is an Ito process with constant volatility . What PDE would be satisfied by the price of options on the stock?
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Private Equity Mathematics
Authors: Oliver Gottschalg
1st Edition
1908783508, 9781908783509
