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Bull. Korean Math. Soc. 2015; 52(3): 947-953
Printed May 31, 2015
https://doi.org/10.4134/BKMS.2015.52.3.947
Copyright © The Korean Mathematical Society.
Regularity of a degenerate parabolic equation appearing in Vecer's unified pricing of Asian options
Hongjie Dong and Seick Kim
Brown University, Yonsei University
Vecer derived a degenerate parabolic equation characterizing the price of Asian options with generally sampled average. It is well understood that there exists a unique probabilistic solution to Vecer's PDE but it remained unclear whether the probabilistic solution is a classical solution. We prove that the probabilistic solution to Vecer's PDE is indeed regular.
Keywords: Asian options, degenerate parabolic equation, regularity of solutions
MSC numbers: 35B65, 35K20, 91B28
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