Assume that the asset price follows geometric Brownian motion where X and Y are two no-arbitrage…
Assume that the asset price follows geometric Brownian
is self-financing. Show that the portfolio Pt is
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