Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. consider two indexes xt, yt that follow the proces

Consider two indexes Xt, Yt that follow the processes dXt = X dt + X...

90.2K

Verified Solution

Question

Finance

Consider two indexes Xt, Yt that follow the processes dXt = X dt + X dWX t , dYt = Y dt + Y dWY t , where X, Y and X, Y are constants, WX t , WY t are two standard Brownian motions that satisfy dWX t dWY t = dt. Let F(Xt, Yt, t) denote the timet of another option whose payoff depends on both index, i.e.,

F(XT , YT , T) = YT if XT /2 YT < 0 and = XT if XT /2 YT 0

Use delta-hedging method to derive the Black-Schole PDE for the options value F(Xt, Yt, t).

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Finance
1.2K views

In 2017, NB Inc.’s federal taxable income was $317,000. Compute the required installment payments of 2018...

Civil Engineering
1.2K views

Alan offers, on day 1, to sell a book to Bob for $100. He then changes...

Biology
1.2K views

If a skateboarder lands on the ground after 3 seconds with a final velocity of...

Basic Math
1.2K views

Factor by grouping. Check your answer.S5-S4 +S-1

Algebra
1.2K views

Write the equation in general form for the graphs of the rational functions Verify the...

Algebra
1.2K views

At a parking lot the attendant can wait on 50 people per hour If people...

Algebra
1.2K views

Write a quadratic function in standard form whose graph has the given characteristics vertex 2...

Accounting
1.2K views

Question 20 5 pts Which of the following costs would...

Accounting
1.2K views

Environment 1. Alice (A) and Bob (B) are the sole producers in the...

Accounting
1.2K views

What does the records review process entail? A- Observing site operations and processes. B -...

Accounting
1.2K views

Retained earnings statement Accounts, Labels and Amount Descriptions Retained Earnings Statement \table[[Accounts, Labels and...