MA470W2020_Quiz1 - Solutions.pdf - MA470/670 u2013 Quiz...

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MA470/670 – Quiz 1 (Total = 20 marks.) Wednesday, January 15, 2020 Name: ID: Consider a ( B, S ) economy with stock price having SDE: dS ( t ) = rS ( t ) dt + σS ( t ) d f W ( t ) with constant interest rate r and σ > 0. 1. State the portfolio self-financing condition in differential form: 2. State the wealth equation in differential form: 3. Express S ( T ) in terms of S ( t ) and e P -Brownian increments (for

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