On the continuity of the time derivative of the solution to the parabolic obstacle problem with variable coefficients (Q2490005)

The following one-dimensional parabolic obstacle problem is considered \[ Lu(x,t)=f(x,t)1_{\{u>0\}}(x,t),\quad (x,t)\in Q_R(P_0)\text{ a.e.},\quad u(x,t)\geq 0, \] where the coefficients \(a, b, c\) and the function \(f\) are Hölder continuous (in the parabolic sense), with both \(a\) and \(f\) strictly positive, and \(Q_R(P_0)=\{(x,t)\in \mathbb{R}^2: | x-x_0| <R, | t-t_0| <R^2\}\). The main result of the paper is concerned with the continuity of the time derivative of \(u\), which essentially reduces to the continuity at points of the free boundary. This property is proved to hold true for almost every \(t\). Under more specific conditions the authors are able to prove continuity for all \(t\) (e.g. if \(u_t\geq 0\)) and also whether or not \(u_t\) is continuous at a given point of the free boundary (on the basis of a density criterion). The result has applications to financial mathematics.