Acta mathematica scientia, Series B >
THE REGULARITY OF THE FREE BOUNDARY FOR |STRIKE RESET OPTION
Received date: 2007-11-30
Online published: 2010-09-20
Supported by
The project is supported by National Natural Science Foundation of China (10901060, 10971073, 1081056), and Natural Science Foundation of Guangdong Province (9451063101002091).
A strike reset option is an option that allows its holder to reset the strike price to the prevailing underlying asset price at a moment chosen by the holder. The pricing model of the option can be formulated as a parabolic variational inequality and the optimal reset strategy is the free boundary. The smoothness of the free boundary in some cases was showed in our article published in JDE. We would prove its smoothness in the other case in this paper by a generalized comparison principle for the variational inequality.
YANG Zhou . THE REGULARITY OF THE FREE BOUNDARY FOR |STRIKE RESET OPTION[J]. Acta mathematica scientia, Series B, 2010 , 30(5) : 1721 -1729 . DOI: 10.1016/S0252-9602(10)60165-8
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