b) Show that with V (x,t) = Ke+ y(x, t), the PDE- av av av =...

Transcribed Image Text:

b) Show that with V (x,t) = Ke+ y(x, t), the PDE- av av av = +b +cV dr dx becomes = - = (a + b + c B )y + (2 +b)dy + dy dy dx dx2 c) Show that for the standard European call the boundary condition is y(x,0)= max d) Along the same line as in part c, please work on the boundary condition respectively for a standard European put, and a forward contract. b) Show that with V (x,t) = Ke+ y(x, t), the PDE- av av av = +b +cV dr dx becomes = - = (a + b + c B )y + (2 +b)dy + dy dy dx dx2 c) Show that for the standard European call the boundary condition is y(x,0)= max d) Along the same line as in part c, please work on the boundary condition respectively for a standard European put, and a forward contract.