Forward equations for option prices in semimartingale models

Rama Cont and Amel Bentata

Papers from arXiv.org

Abstract: We derive a forward partial integro-differential equation for prices of call options in a model where the dynamics of the underlying asset under the pricing measure is described by a -possibly discontinuous- semimartingale. A uniqueness theorem is given for the solutions of this equation. This result generalizes Dupire's forward equation to a large class of non-Markovian models with jumps.

Date: 2010-01, Revised 2012-01
New Economics Papers: this item is included in nep-fmk
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Published in Finance and Stochastics, July 2015, Volume 19, Issue 3, pp 617-65

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1001.1380

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