Dupire’s Equation for Bubbles
نویسندگان
چکیده
We study Dupire’s equation for local volatility models with bubbles. The equation for call options contains extra terms compared to the usual equation, whereas, surprisingly enough, the Dupire equation for put options does not contain any extra terms. We also note that uniqueness of solutions to the Dupire equation is lost in general, and we show how to single out the option price among all possible solutions.
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تاریخ انتشار 2009