Optimal regularity in the obstacle problem for Kolmogorov operators related to American Asian options
The author prove optimal interior regularity for solutions to the obstacle problem for a class of second order differential operators of Kolmogorov type. Smooth obstacles as well as non-smooth obstacles are considered. The proofs are based on blow-ups, compactness, barriers and arguments by contradiction. The problem considered arises in financial mathematics, when considering path-dependent derivative contracts with early exercise feature.
scientific article; zbMATH DE number 5721502
scientific article