The blow-up technique in terms of stochastics applied to optimal stopping problems in finance
(English)Manuscript (Other academic)
The blow-up technique is a useful tool for local analysis in PDEtheory. It is applicable to non-linear, higher dimensional PDEs. In this paperwe translate the blow-up technique to stochastic terms by considering thestochastic representation of solutions to PDEs. For illustration we apply theblow-up technique to obtain the early exercise boundary regularity close to expiryfor American put and call options in the classic Black-Scholes framework.
IdentifiersURN: urn:nbn:se:kth:diva-8545OAI: oai:DiVA.org:kth-8545DiVA: diva2:13897
QC 201006292008-05-292008-05-292010-06-30Bibliographically approved