Hi everyone,
For this question, it was asking what is the 'replicating strategy/portfolio' of the derivative given. I have no idea how did the solution come up with theta=df/ds number of stocks and Et-theta t Dt number of bonds, and then to adjust the portfolio according to delta.
Firstly, where did the notation Et even come from and what does it represent? Secondly, are these solutions derived from the known stochastic PDE of St and Dt solved from 2b and 2c?
Thirdly, would anyone have an idea which Chapter in the textbooks mention about replicating strategy from a stochastic equation?
Thanks in advanced.
For this question, it was asking what is the 'replicating strategy/portfolio' of the derivative given. I have no idea how did the solution come up with theta=df/ds number of stocks and Et-theta t Dt number of bonds, and then to adjust the portfolio according to delta.
Firstly, where did the notation Et even come from and what does it represent? Secondly, are these solutions derived from the known stochastic PDE of St and Dt solved from 2b and 2c?
Thirdly, would anyone have an idea which Chapter in the textbooks mention about replicating strategy from a stochastic equation?
Thanks in advanced.
QFIC Fall 2013 Q2 (d)
0 commentaires:
Enregistrer un commentaire