Forward equations for option prices in semimartingale models
AbstractWe 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. This result generalizes Dupire's forward equation to a large class of non-Markovian models with jumps and allows to retrieve various forward equations previously obtained for option prices in a unified framework.
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Date of creation: 2009
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- Amel Bentata & Rama Cont, 2012. "Short-time asymptotics for marginal distributions of semimartingales," Papers 1202.1302, arXiv.org.
- Forde, Martin, 2014. "On the Markovian projection in the Brunick–Shreve mimicking result," Statistics & Probability Letters, Elsevier, vol. 85(C), pages 98-105.
- Amel Bentata & Rama Cont, 2012. "Short-time asymptotics for marginal distributions of semimartingales," Working Papers hal-00667112, HAL.
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