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Joined 2026-09-21
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Local volatility
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Body
0
Local volatility model
2026-10-06
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The
stock
diffusion
d
S
t
=
S
t
(
r
d
t
+
σ
(
t
,
S
t
)
d
W
t
)
has spot-dependent
local volatility
. With positive volatility and the
Brownian filtration
,
Brownian martingale representation theorem
converts discounted payoff
martingales
into
stock
gains.
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articles
:
1