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dc.contributor.authorBender, C.
dc.contributor.authorDokuchaev, Nikolai
dc.date.accessioned2017-01-30T13:56:05Z
dc.date.available2017-01-30T13:56:05Z
dc.date.created2015-07-16T06:22:02Z
dc.date.issued2017
dc.identifier.citationBender, C. and Dokuchaev, N. 2017. A First-Order BSPDE for Swing Option Pricing: Classical Solutions. Mathematical Finance. 27 (3): pp. 902-925.
dc.identifier.urihttp://hdl.handle.net/20.500.11937/36508
dc.identifier.doi10.1111/mafi.12096
dc.description.abstract

In a companion paper, we studied a control problem related to swing option pricing in a general non-Markovian setting. The main result there shows that the value process of this control problem can uniquely be characterized in terms of a first-order backward stochastic partial differential equation (BSPDE) and a pathwise differential inclusion. In this paper, we additionally assume that the cash flow process of the swing option is left-continuous in expectation. Under this assumption, we show that the value process is continuously differentiable in the space variable that represents the volume in which the holder of the option can still exercise until maturity. This gives rise to an existence and uniqueness result for the corresponding BSPDE in a classical sense. We also explicitly represent the space derivative of the value process in terms of a nonstandard optimal stopping problem over a subset of predictable stopping times. This representation can be applied to derive a dual minimization problem in terms of martingales.

dc.publisherJohn Wiley & Sons
dc.subjectoptimal stopping
dc.subjectBackward SPDE
dc.subjectstochastic optimal control
dc.subjectswing options
dc.titleA First-Order BSPDE for Swing Option Pricing: Classical Solutions
dc.typeJournal Article
dcterms.source.volume27
dcterms.source.startPage902
dcterms.source.endPage925
dcterms.source.issn14679965
dcterms.source.titleMathematical Finance
curtin.note

This is the peer reviewed version of the above-cited article, which has been published in final form at http://doi.org/10.1111/mafi.12096. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving at http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms

curtin.departmentDepartment of Mathematics and Statistics
curtin.accessStatusOpen access


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