New answers tagged stochastic-calculus
2
votes
Can the PDE of Black and Scholes really be derived from the CAPM?
I was looking at this just this morning. It can be derived from CAPM, depending on what is meant by 'the market', in addition to some other (simplifying) assumptions which I write below:
So let's ...
- 1,614
0
votes
Balland - SABR goes normal
Found it by rewriting the model with a 2-dimensional Brownian motion (i.e. vector of independent Brownian components)
$$
\begin{cases}
d S_t = \sigma_t \varphi \left(S_t\right) d \tilde{W}_t^1 \\
d \...
- 2,540
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