Question: Question 4 [15 marks] The Black-Scholes Partial Differential Equation (PDE) is given by rStC/St + C/t + 2 St 2 2 C/St 2 = rC.

Question 4 [15 marks]

The Black-Scholes Partial Differential Equation (PDE) is given by rStC/St + C/t + 2 St 2 2 C/St 2 = rC. Without deriving the PDE

(c) Explain the purpose of a replicating portfolio.

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