The Fundamental Asset Pricing Partial Differential Equation (PDE) Is Used

question 7

Multiple Choice

The fundamental asset pricing partial differential equation (PDE) is used to derive the Black-Scholes formula. Which of the following statements is not true about the fundamental PDE?

• A) The PDE depends on the growth rate of the stock.
• B) The PDE is independent of the the utility function of the investor buying the option.
• C) The PDE is the same for both calls and puts, the only difference being in the boundary conditions.
• D) The solution to the PDE is the Black-Scholes option pricing formula.

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