In this paper, we show that the calibration to an implied volatility surface and the pricing of contingent claims can be as simple in a jump-diffusion framework as in a diffusion one. Indeed, after defining the jump densities as those of diffusions sampled at independent and exponentially...

We develop a new option pricing framework that tightly integrates with how institutional investors manage options positions. The framework starts with the near-term dynamics of the implied volatility surface and derives no-arbitrage constraints on its current shape. Within this framework, we...