paper
No arbitrage assumption implies the differentiability of derivative pricing function
Kihun Nam, Yunxi Xu
No arbitrage assumption implies the differentiability of derivative pricing function
Kihun Nam, Yunxi Xu
Paper2025-06-27English
derivatives pricingarxiv
Description
In this article, we show necessary and sufficient conditions for a function to transform a continuous Markov semimartingale to a semimartingale. As a result, the no-arbitrage principle guarantees the differentiability of asset prices with respect to the underlying noise, if the asset prices are continuous and the underlying noise is a continuous Markov semimartingale.
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