We consider two sequences of Markov chains inducing equivalent measures on the discrete path space. We establish conditions under which these two measures converge weakly to measures induced on the Wiener space by weak solutions of two SDEs, which are unique in the sense of probability law. We...

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...