- 9. Pricing a Security Derivative. Consider an economy consisting of a risk-free asset and a stock price (risky asset). At time
, the risk-free asset 
and the stock price 
have the following diffusion processes
where
is the risk-free rate, 
is the continuous dividend yield, 
is the stock price growth rate, 
is the stock price volatility (which are all time dependent) and 
is a 
-standard Wiener process on the probability space .At time , we consider a trader who has a portfolio valued at holding ...
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