On Backward Stochastic Differential Equations Approach to Valuation of American Options
Volume 59 / 2011
Bulletin Polish Acad. Sci. Math. 59 (2011), 275-288
MSC: Primary 91G20; Secondary 60H30, 60H99.
DOI: 10.4064/ba59-3-8
Abstract
We consider the problem of valuation of American (call and put) options written on a dividend paying stock governed by the geometric Brownian motion. We show that the value function has two different but related representations: by means of a solution of some nonlinear backward stochastic differential equation, and by a weak solution to some semilinear partial differential equation.
