... 1:Chapter 14The Itˆo IntegralThe following chapters deal with Stochastic Differential Equations in Finance. References:1. B. Oksendal, Stochastic Differential Equations, Springer-Verlag,19952. ... these from the other and solving for1T , we obtain the “delta-hedging for-mula”1T =V2TH , V2TTS2TH , S2TT;(1.12)and substituting this into either equation, we can ... 1. Introduction to Probability Theory15of stock, investingV0, 0S0dollars in the money market to finance this. At time1, the agent hasa portfolio (excluding the short position in the...