ASAP

(a) Let S be an asset that behaves according to a log-normal distribution such that dS = S(udt + odZ) Use Ito's Lemma to obtain stochastic differential equations for 1. d In(S) 2. d (s) (b) Show by direct substitution that two exact solution of the Black-Scholes formula are V(S,t) =AS V(S,t) = Ae" What do these solutions represent. (a) Let S be an asset that behaves according to a log-normal distribution such that dS = S(udt + odZ) Use Ito's Lemma to obtain stochastic differential equations for 1. d In(S) 2. d (s) (b) Show by direct substitution that two exact solution of the Black-Scholes formula are V(S,t) =AS V(S,t) = Ae" What do these solutions represent