American lookback option with fixed strike price-2-D parabolic variational inequality (Q640996): Difference between revisions

The authors study a 2-dimensional parabolic variational inequality which is fulfilled by the price of the American lookback put option with fixed strike, i.e. an exotic option where the payoff depends on the minimum of the price of the given asset over the time period from the issuance till it is exercised. The equations are derived under the standard assumption that the asset price is driven by the geometric Brownian process under the risk neutral measure. The goal of the paper is to prove the existence and uniqueness of the weak solution of the variational problem. Moreover, the authors analyze the behaviour of the free boundary surface.