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A degenerate parabolic variational inequality for the American option pricing problem. (English) Zbl 0914.49007

Summary: A formulation in terms of degenerate parabolic variational inequalities for the price of an American put option is stated. The usual uniform ellipticity condition is weakened by the presence of a weight function. Then the appropriate framework is that of some suitable “weighted” Sobolev spaces. One applies a result previously stated by the authors [Adv. Math. Sci. Appl. 7, No. 2, 651-666 (1997; preceding review)].

MSC:

49J40 Variational inequalities
91B24 Microeconomic theory (price theory and economic markets)

Citations:

Zbl 0914.49006
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