Yeah, it should be dlog(S(t, S)) = (r(t) - \frac{\sigma(t, S)^2}{2}) dt + \sigma dW_t
Yee Man
--- On Tue, 9/9/08, Sun, Xiuxin <
xiuxin.sun@...> wrote:
> From: Sun, Xiuxin <
xiuxin.sun@...>
> Subject: [Quantlib-dev] question on Black-Scholes stochastic process.
> To:
quantlib-dev@...
> Date: Tuesday, September 9, 2008, 1:43 AM
> HI all,
>
> In blackscholesprocess.hpp there are comment lines about
> what the
> BlackScholesProcess stands for :
>
> dS(t, S) = (r(t) - \frac{\sigma(t, S)^2}{2}) dt +
> \sigma dW_t.
>
> For this since it is a differential format, shouldn't
> BS process be
> dS(t, S)/S(t, S) = ... ?
>
> Also is the drift part from the brownie motion ,
> \frac{\sigma(t,
> S)^2}{2}) , still presented in the differential format?
>
> please help to make me clear.
>
> Regards,
> sun
>
>
>
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