REFLECTED BSDES WITH STOCHASTIC MONOTONE GENERATOR AND APPLICATION TO VALUING AMERICAN OPTIONS

Mohamed Marzougue ()
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Mohamed Marzougue: Laboratory of Analysis and Applied Mathematics (LAMA), Faculty of Sciences Agadir, Ibn Zohr University, Morocco

International Journal of Theoretical and Applied Finance (IJTAF), 2020, vol. 23, issue 05, 1-26

Abstract: In this paper, we prove the existence and uniqueness of the solution to backward stochastic differential equations with lower reflecting barrier in a Brownian setting under stochastic monotonicity and general increasing growth conditions. As an application, we study the fair valuation of American options.

Keywords: Reflected backward stochastic differential equations; stochastic monotonicity; stochastic Lipschitz; penalization method (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S021902492050034X

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