Reflected BSDE with a Constraint and a New Doob-Meyer Nonlinear Decomposition

Shige Peng and Mingyu Xu

Papers from arXiv.org

Abstract: In this paper, we study a type of reflected BSDE with a constraint and introduce a new kind of nonlinear expectation via BSDE with a constraint and prove the Doob-Meyer decomposition with respect to the super(sub)martingale introduced by this nonlinear expectation. We then apply the results to the pricing of American options in incomplete market.

Date: 2006-11, Revised 2008-07
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