Option Price When the Stock is a Semimartingale

Fima Klebaner (University Melbourne)

Abstract


The purpose of this note is to give a PDE satisfied by a call option when the price process is a semimartingale. The main result generalizes the PDE in the case when the stock price is a diffusion. Its proof uses Meyer-Tanaka and occupation density formulae. Presented approach also gives a new insight into the classical Black-Scholes formula. Rigorous proofs of some known results are also given.

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Pages: 79-83

Publication Date: January 31, 2002

DOI: 10.1214/ECP.v7-1049

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