N shares follow geometric Brownian motions, i.e. dS i = i S i dt +
Question:
N shares follow geometric Brownian motions, i.e.
dSi = μiSi dt + σiSi dXi,
for 1 ≤ i ≤ N. The share price changes are correlated with correlation coefficients ρij. Find the stochastic differential equation satisfied by a function f(S1, S2, . . . , SN).
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To find the function f we use the orthogonality rela...View the full answer
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