Hi everyone,
Was reading Part One ( # 7.2 DERIVATION OF THE FORMULAE FOR CALLS, PUTS AND SIMPLE DIGITALS) from : Paul Wilmott on Quantitative Finance 2nd Ed.
I can't get how it's done to transform the equation from dU/dTo = 0.5sigma²S² d²U/dS² ... to :
dU/dTo = 0.5sigma²d²U/dEta² + (r-0.5sigma²) dU/dEta
Actually it's the secondary derivation that I can't get : d²/dS² = exp(-2Eta) d²/dEta² - exp(-2Eta)d/dEta
How does it come one has exp(-2Eta) !!
Any idea ?
Much appreciate !