# Assume that the asset price follows geometric Brownian motion where X and Y are two no-arbitrage…

- September 24, 2021 /
- ecommerce Development, web development, Software Development, Online marketing, Magento, Ecommerce

Assume that the asset price follows geometric Brownian

motion

where X and Y are two no-arbitrage assets. Show that a

portfolio Pt which is given by

is self-financing. Show that the portfolio Pt is

self-financing when

and prove this relationship using the Ito’s formula.

Assume a geometric Brownian motion model for XY (t).

Determine which of the following portfolios are self-financing:

Show that the difference between the futures price and

the forward price satisfy

Chapter 2