The Merton jump-diffusion process, the Esscher transform, and the implied volatility smile are derived from Maximum Entropy inference applied to log-price dynamics with continuity, directionality, and jump constraints.
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Entropic Dynamics of Jump-Diffusion Option Pricing
The Merton jump-diffusion process, the Esscher transform, and the implied volatility smile are derived from Maximum Entropy inference applied to log-price dynamics with continuity, directionality, and jump constraints.