Hambly, Ben; Mariapragassam, Matthieu; Reisinger, Christoph - arXiv.org - 2014
We derive a forward equation for arbitrage-free barrier option prices, in terms of Markovian projections of the stochastic volatility process, in continuous semi-martingale models. This provides a Dupire-type formula for the coefficient derived by Brunick and Shreve for their mimicking diffusion...