This question is incomplete, the complete question is;
A stock price S is governed by dS = aSdt + bSdz
where z is a standardized Wiener process. Find the process that governs G(t) = S^1/2(t)
Answer:
G = S^1/2
Explanation:
Solving the Equation
dS = aSdt + bSdz
First we Take S common from Right hand Side
dS = S(a dt + b dz)
Then we also take S Left Hand Side(LHS) from RHS
dS/S = a dt + b dz
So d = a dt + b dz
now we Take d Common from RHS
d = d(a t + b z)
So
d/d = a t + b z
1 = a t + b z
So, t = (1-b z) / a
Now substitute value of t in equation G(t) = S^1/2(t)
we have
G{(1- b z)/a} = S^1/2 {(1- b z)/a}
(1- b z)/a) from both sides cancels out each other
So we have G = S^1/2