Now comparing the drift coefficients in (2.10) and (2.3) we have:
Making use of (2.11) yields:
Rearranging terms we have a partial differential equation for the price of any contingent claim [5] :
This valuation equation holds for any contingent claim. Specific terminal and boundary conditions as well as the structure of , the payout flow, define the unique characteristics of a claim.
[5] First group the coefficients of F W and make use of (2.8) to give: