Time-dependent Double Obstacle Problem Arising from European Option Pricing with Transaction Costs

Jehan Oh; Namgwang Woo

doi:10.5666/KMJ.2022.62.4.615

Time-dependent Double Obstacle Problem Arising from European Option Pricing with Transaction Costs

Jehan Oh
, Namgwang Woo

Kyungpook National University

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper, we investigate a time-dependent double obstacle problem associated with the model of European call option pricing with transaction costs. We prove the existence and uniqueness of a W ^2,1 _p,loc solution to the problem. We then characterize the behavior of the free boundaries in terms of continuity and values of limit points.

Original language	English
Pages (from-to)	615-640
Number of pages	26
Journal	Kyungpook Mathematical Journal
Volume	62
Issue number	4
DOIs	https://doi.org/10.5666/KMJ.2022.62.4.615
State	Published - 2022

Keywords

Double obstacle problem
Free boundary
Option pricing
Parabolic partial differential equation
Time-dependent obstacle

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10.5666/KMJ.2022.62.4.615

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title = "Time-dependent Double Obstacle Problem Arising from European Option Pricing with Transaction Costs",

abstract = "In this paper, we investigate a time-dependent double obstacle problem associated with the model of European call option pricing with transaction costs. We prove the existence and uniqueness of a W 2,1 p,loc solution to the problem. We then characterize the behavior of the free boundaries in terms of continuity and values of limit points.",

keywords = "Double obstacle problem, Free boundary, Option pricing, Parabolic partial differential equation, Time-dependent obstacle",

author = "Jehan Oh and Namgwang Woo",

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AU - Oh, Jehan

AU - Woo, Namgwang

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PY - 2022

Y1 - 2022

N2 - In this paper, we investigate a time-dependent double obstacle problem associated with the model of European call option pricing with transaction costs. We prove the existence and uniqueness of a W 2,1 p,loc solution to the problem. We then characterize the behavior of the free boundaries in terms of continuity and values of limit points.

AB - In this paper, we investigate a time-dependent double obstacle problem associated with the model of European call option pricing with transaction costs. We prove the existence and uniqueness of a W 2,1 p,loc solution to the problem. We then characterize the behavior of the free boundaries in terms of continuity and values of limit points.

KW - Double obstacle problem

KW - Free boundary

KW - Option pricing

KW - Parabolic partial differential equation

KW - Time-dependent obstacle

UR - https://www.scopus.com/pages/publications/85146661165

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DO - 10.5666/KMJ.2022.62.4.615

M3 - Article

AN - SCOPUS:85146661165

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JO - Kyungpook Mathematical Journal

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IS - 4

ER -

Time-dependent Double Obstacle Problem Arising from European Option Pricing with Transaction Costs

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Keywords

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