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October 12th, 2017, 11:20 am
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684

### Re: to Black Scholes pricing

I do not fully grasp your argument. Where do you do the portfolio rebalancing step? At each time step t, we have a value before and after rebalancing / rehedging... I miss this step in your last post, but maybe I didn't get what you are saying :( In order to present BS price we choose arbitrary poi...
October 11th, 2017, 4:19 pm
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684

### Re: to Black Scholes pricing

There is something that I could not comprehend in derivation (BSE). In one step [ t , t + dt ) everything looks quite good but this is informal style.  To be formal we should make several steps: 1) take a subinterval ( s , t ) $\in$ [ 0 , T ] make a partition $s=t_0 < t_1 < ... < t_m = t$ ....
October 11th, 2017, 3:21 pm
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684

### Re: to Black Scholes pricing

It seems that there is an error in your mathematical argument.

The hedge portfolio is held fixed from t to t+dt, so there is no derivative of Delta with respect to S involved.
I did not take derivative of Delta.
October 9th, 2017, 10:06 pm
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684

### Re: to Black Scholes pricing

Are you considering a one time static hedge at t=0, or a continuous dynamic re-heding at all points in time in the interval [0,T] ..like B&S assume? From my point of view BS pricing states that at any point during lifetime of the option the solution of the BSE provides risk free rates of return...
October 9th, 2017, 8:35 pm
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684

### Re: to Black Scholes pricing

It's likely I was wrong in my conclusion about BS pricing
October 8th, 2017, 10:02 pm
Forum: Off Topic
Topic: Mushrooming Microsoft
Replies: 55
Views: 4999

### Re: Mushrooming Microsoft

October 8th, 2017, 1:17 pm
Forum: Student Forum
Topic: to Black Scholes pricing
Replies: 23
Views: 4684