Question

Deduce the differential equation for a derivative dependent on the prices of two nondividend-paying traded securities by forming a riskless portfolio consisting of the derivative and the two traded securities. 

   Deduce the differential equation for a derivative dependent on the prices of two nondividend-paying traded securities by forming a riskless portfolio consisting of the derivative and the two traded securities.
Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 28, Problem 5 ↓

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Let \( S_1(t) \) and \( S_2(t) \) be the prices of the two nondividend-paying traded securities at time \( t \). Let \( V(t) \) be the price of the derivative that depends on these two securities.  Show more…

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Deduce the differential equation for a derivative dependent on the prices of two nondividend-paying traded securities by forming a riskless portfolio consisting of the derivative and the two traded securities.
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