This paper studies the nonlinear variational inequality with integro-differential term arising from valuation of American style double barrier option. First, the authors use the penalty method to transform the variati...This paper studies the nonlinear variational inequality with integro-differential term arising from valuation of American style double barrier option. First, the authors use the penalty method to transform the variational inequality into a nonlinear parabolic initial boundary problem(i.e., penalty problem). Second, the existence and uniqueness of solution to the penalty problem are proved by using the Scheafer fixed point theory. Third, the authors prove the existence of variational inequality' solution by showing the fact that the penalized PDE converges to the variational inequality. The uniqueness of solution to the variational inequality is also proved by contradiction.展开更多
基金supported by the National Science Foundation of China under Grant Nos.71171164 and 70471057the Doctorate Foundation of Northwestern Polytechnical University under Grant No.CX201235
文摘This paper studies the nonlinear variational inequality with integro-differential term arising from valuation of American style double barrier option. First, the authors use the penalty method to transform the variational inequality into a nonlinear parabolic initial boundary problem(i.e., penalty problem). Second, the existence and uniqueness of solution to the penalty problem are proved by using the Scheafer fixed point theory. Third, the authors prove the existence of variational inequality' solution by showing the fact that the penalized PDE converges to the variational inequality. The uniqueness of solution to the variational inequality is also proved by contradiction.
