Partial Information: The Greeks

Abstract

Applying the Equation 6.1 argument to P _E(S, t), along with the boundary condition $P_E(S, T) = \max (E-S, 0)$, makes it reasonable to expect that

$$\displaystyle P_E(S, t) = Ee^{-r(T-t)}\times [\mathrm{modifying terms}] - S\times [\mathrm{modifying terms}]. $$

This the case. The actual P _E(S, t) solution follows immediately from our powerful friend the Put–Call Parity Equation.