A variational inequality arising from European option pricing with transaction costs

作者：Yi FaHuai^*; Yang Zhou

来源：Science in China Series A-Mathematics, 2008, 51(5): 935-954.

DOI：10.1007/s11425-007-0175-4

• option pricing
• transaction costs
• free boundary
• variational inequality

In this paper we present a method which can transform a variational inequality with gradient constraints into a usual two obstacles problem in one dimensional case. The prototype of the problem is a parabolic variational inequality with the constraints of two first order differential inequalities arising from a two-dimensional model of European call option pricing with transaction costs. We obtain the monotonicity and smoothness of two free boundaries.

• 出版日期2008-5
• 单位华南师范大学