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If someone wants simple intuition, here is what happened to the drift. It did go into the formula, believe it or not, but it came into the B-S math sort of in two ways so it cancelled out in the end. It disappears because Black-Scholes assumes people may have different preferences for risk, but at least everyone is consistent on their own preference. ...


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The error is in the application of Girsanov theorem. We have multivariate Black-Sholes market, however I apply one-dimensional Girsanov theorem. I should apply multi-dimensional Girsanov theorem. Then there would be now such equations, except the case for $\rho=1$. The alike task is formulated here ...



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