Tag Info

New answers tagged

1

You Know that $dB_t=r_tB(t)dt$ . Ito's formula give us \begin{align} dZ(t)=\frac{1}{B(t)}d\,\Pi(t)-\frac{\Pi(t)}{B\,^2(t)}dB(t)+0 \end{align} As your teacher mentioned, $d\Pi(t)=r(t)\Pi(t)dt+\sigma(\Pi(t),t)dW(t)$,Thus we have \begin{align} & dZ(t)=\frac{1}{B(t)}[r(t)\Pi(t)dt+\sigma(\Pi(t),t)dW(t)]-\frac{\Pi(t)}{B\,^2(t)}r(t)B(t)dt\\ & ...



Top 50 recent answers are included