On nonexistence of non-constant volatility in the Black-Scholes formula

K. Hamza and F. C. Klebaner

Papers from arXiv.org

Abstract: We prove that if the Black-Scholes formula holds with the spot volatility for call options with all strikes, then the volatility parameter is constant. The proof relies some result on semimartingales (Theorem 2) of independent interest.

Date: 2005-02
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