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Taylor series expansion (finicial math) If f1 = (S − 1)^2 and f2 = (e^(S−1) +...

Taylor series expansion (finicial math)

If f1 = (S − 1)^2 and f2 = (e^(S−1) + e^(1−S) − 2) and

df1= 2us(s-1)dt + 2σs(s-1)dw

df2 = [us(s-1) + ((s-1)^3)/3+....]dt + -s [2(s-1)+((s-1)^3)/3+....] dw

A) Compute Taylor series expansions of df1 and of df2 about S = 1 to O ( (S − 1)^2 , and compare the results of the two expansions.

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