# Use of Local Times in Option Pricing

I know two applications of local time in option pricing theory.
First, it allows a derivation of Dupire's formula on local volatility in a neat way (i.e. without resorting to differential operator theory which I'm not really acquainted with).

Second, it can be used to show that you can't perfectly replicate (for example) a call option final payoff by the naive strategy of letting conditional orders on the market consistent with the strike in a Black-Scholes context.

Does anyone is aware of other applications of local times in finance, answers with references would be most appreciated ?

Best regards

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The latter one is also known as "hedging through the cap". –  vonjd Oct 27 '11 at 18:18