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arxiv: 1001.1380 · v4 · pith:KKPGV5T3new · submitted 2010-01-08 · 💱 q-fin.PR · math.PR· q-fin.CP

Forward equations for option prices in semimartingale models

classification 💱 q-fin.PR math.PRq-fin.CP
keywords equationforwardmodelspricessemimartingaleassetcallclass
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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.

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