On this page, Step 5, it says, Let ψ(t) = E(t) - Φ(t)D(t) but on page 24 of Charpter 13, step 5,it says, let ψ(t) = E(t-1) - Φ(t)D(t-1), so timing is not consistent here, or they mean the same thing? Many thanks.
Hi Avviey, I think you may be looking at the proofs in discrete time and then in continuous time? The time period chosen to demonstrate the self-financing portfolio in discrete time is [t-1,t] whereas in continous time it is [t. t+dt) You could choose any time period really so long as it is one time step in discrete time or an infinitesimally small time period in cts time. The exact letters aren't important so long as you are consistent in one proof. Good luck! John
