+ rs- Os as2 (b) Verify that f(s, t) = e(21+30°)(T-1)* is a solution of the Black-Scholes partial differential equation

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Rs Os As2 B Verify That F S T E 21 30 T 1 Is A Solution Of The Black Scholes Partial Differential Equation 1 (443.13 KiB) Viewed 24 times

+ rs- Os as2 (b) Verify that f(s, t) = e(21+30°)(T-1)* is a solution of the Black-Scholes partial differential equation af af at as + 20's? =rf. Consider a derivative with underlying asset whose price S, follows the Itô process dS = Sedt +oSDW and which provides a single payoff at time T > 0) in the amount of S, where Sr is the underlying asset price at time T. What is the price of this derivative at time t € (0,T)? (You may use results in the notes.)