Can anyone give me a detailed explanation of how below equations (3) and (4) are derived from (1) and (2)? dFt,TFt,T=σe−λ(T−t)dBt,ln(Ft,T)=ln(F0,T)−1/2∫t0σ2e−2λ(T−s)ds+∫t0σe−λ(T−s)dBs.
Given ln(St)=ln(Ft,t), we have: dStSt=(μt−λln(St))dt+σdBt,
where μt=∂ln(F0,t)∂t+λln(F0,t)+14σ2(1−e−2λt).
Or anything related to them will be helpful.
Answer
From (2), lnSt=lnFt,t=lnF0,t−12∫t0σ2e−2λ(t−s)ds+∫t0σe−λ(t−s)dBs=lnF0,t−σ24λ(1−e−2λt)+e−λt∫t0σeλsdBs.
Then, λe−λt∫t0σeλsdBs=λlnSt−λlnF0,t+σ24(1−e−2λt).
Therefore, dlnSt=(∂lnF0,t∂t−σ22e−2λt−λe−λt∫t0σeλsdBs)dt+σdBt=[∂lnF0,t∂t−σ22e−2λt+λlnF0,t−σ24(1−e−2λt)−λlnSt]dt+σdBt=(∂lnF0,t∂t+λlnF0,t−σ24−σ24e−2λt−λlnSt)dt+σdBt.
Note that d⟨lnS,lnS⟩t=σ2dt.
By Ito's lemma, dSt=delnSt=elnStdlnSt+12elnStd⟨lnS,lnS⟩t=StdlnSt+12σ2Stdt=St[(∂lnF0,t∂t+λlnF0,t−σ24−σ24e−2λt−λlnSt)dt+σdBt+σ22dt]=St[(μt−λlnSt)dt+σdBt],
where μt=∂lnF0,t∂t+λlnF0,t+σ24(1−e−2λt).
No comments:
Post a Comment