We review the relations between adjoints of stochastic control problems with the derivative of the value function, and the latter with the value function of a stopping problem. These results are applied to the pricing of contingent claims.

We review the relations between adjoints of stochastic control problems with the derivative of the value function, and the latter with the value function of a stopping problem. These results are applied to the pricing of contingent claims.

Certain exotic options cannot be valued using closed-form solutions or even by numerical methods assuming constant volatility. Many exotics are priced in a local volatility framework. Pricing under local volatility has become a field of extensive research in finance, and various models are...

This paper describes a method for computing risk-neutral density functions based on the option-implied volatility smile. Its aim is to reduce complexity and provide cookbook-style guidance through the estimation process. The technique is robust and avoids violations of option no-arbitrage...