Option pricing
Let us consider an example here, such that:

: Denotes the stock price at time
: Denotes the bond price at time

Diagrammatically Figures 13 (a) & (b) denote the situations which show the price movement of a typical stock and a bond. Thus we have the following situations

Figure 10.1: A typical stock price movement in upward or downward direction

Figure 10.2: A typical bond price movement in upward direction

Furthermore consider the call.