SDEs with two reflecting barriers driven by semimartingales and processes with bounded p-variation

Adrian Falkowski and Leszek Słomiński

Stochastic Processes and their Applications, 2022, vol. 146, issue C, 164-186

Abstract: We study the existence, uniqueness and approximation of solutions of general stochastic differential equations (SDEs) with two time-dependent reflecting barriers driven by semimartingales and processes with bounded p-variation, p∈[1,2). We do not assume that the barriers have to be completely separated. Applications to currency option pricing in financial models with fractional Brownian motion and standard Brownian motion are given.

Keywords: Stochastic differential equation; Reflecting barriers; Semimartingale; p-variation; Fractional Brownian motion (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:spapps:v:146:y:2022:i:c:p:164-186

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DOI: 10.1016/j.spa.2022.01.004

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