Forward equations for option prices in semimartingale models

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. 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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Section on Uniqueness (Sec 1.3.) added. 2009
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https://hal.archives-ouvertes.fr/hal-00445641
Contributor : Rama Cont <>
Submitted on : Thursday, April 21, 2011 - 4:47:47 PM
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  • HAL Id : hal-00445641, version 3

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Amel Bentata, Rama Cont. Forward equations for option prices in semimartingale models. Section on Uniqueness (Sec 1.3.) added. 2009. <hal-00445641v3>

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