Forward equations for option prices in semimartingale models
Pricing of Securities
2015-09-04 v4 Probability
Computational Finance
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.
Keywords
Cite
@article{arxiv.1001.1380,
title = {Forward equations for option prices in semimartingale models},
author = {Rama Cont and Amel Bentata},
journal= {arXiv preprint arXiv:1001.1380},
year = {2015}
}
Comments
Proof shortened+ reference added. Final revision before publication