Deriving the Black - Schole Equation
Solve the following problem:
The BSM equation for a derivative F on a stock paying no dividends is:
∂F/∂t+(1/2)σ2S2 (∂2F/∂S2)+rS(∂F/∂S)-rF=0
If you were to transform this PDE with the substitution S = Kex, where x is a variable and K a constant, what would be the resulting equation?