The evolution of the bank account is governed by which can be understood as geometric Brownian motion
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The evolution of the bank account is governed by
which can be understood as geometric Brownian motion with ? = 0. Manipulate the resulting Black?Scholes-equation to show that it is equivalent to the so-called transport equation
with the substitution V(B, t) = e?r(T?t)U(B, t) and x = log B.
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