Volume 11, February 2007Special Issue: "Stochastic analysis and mathematical finance" in honor of Nicole El Karoui's 60th birthday
|Page(s)||3 - 22|
|Published online||01 March 2007|
Reflected backward stochastic differential equations with two RCLL barriers
Département de Mathématiques, Université du
Maine, Avenue Olivier Messiaen, 72085 Le Mans Cedex 9, France; Jean-Pierre.Lepeltier@univ-lemans.fr; firstname.lastname@example.org
Accepted: September 2005
In this paper we consider BSDEs with Lipschitz coefficient reflected on two discontinuous (RCLL) barriers. In this case, we prove first the existence and uniqueness of the solution, then we also prove the convergence of the solutions of the penalized equations to the solution of the RBSDE. Since the method used in the case of continuous barriers (see Cvitanic and Karatzas, Ann. Probab. 24 (1996) 2024–2056 and Lepeltier and San Martín, J. Appl. Probab. 41 (2004) 162–175) does not work, we develop a new method, by considering the solutions of the penalized equations as the solutions of special RBSDEs and using some results of Peng and Xu in Annales of I.H.P. 41 (2005) 605–630.
Mathematics Subject Classification: 60H10 / 60G40
Key words: Reflected backward stochastic differential equation / penalization method / optimal stopping / Snell envelope / Dynkin game.
© EDP Sciences, SMAI, 2007
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