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Black Scholes equation

Last modified by Nikita Kapchenko on 2019/09/26 16:45
  1. hypothesis on asset dynamic
  2. payoff definition at T (price(T) = payoff(T))
  3. general price dynamic at t (Ito)
  4. construction of hedging portfolio: -V + delta*Asset + ...
  5. assumption that hedge portfolio follows riskfree rate (we can build portfolio with risk asset + ingridients => riskless)
  6. Deduce hedge coefficient: delta, vega ...