Stochastic representations of derivatives of solutions of one-dimensional parabolic variational inequalities with Neumann boundary conditions (Q537129)
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English | Stochastic representations of derivatives of solutions of one-dimensional parabolic variational inequalities with Neumann boundary conditions |
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Stochastic representations of derivatives of solutions of one-dimensional parabolic variational inequalities with Neumann boundary conditions (English)
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19 May 2011
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Interested in parabolic variational inequalities over the whole Euclidean space with viscosity solution \(V\), and taking into account that the numerical resolution of such inequalities requires to introduce a boundary and artificial boundary conditions, the authors approximate the following variational inequality \[ \left\{\begin{aligned}&\min\Big\{V(t,x)-Lt,x)\mid-\frac{\partial V}{\partial t}(t,x)\\&\quad-\mathcal{A}V(t,x)-f\big(t,x,V(t,x),(\nabla V\sigma)(t,x)\big) \Big\}=0,\quad (t,x)\in[0,T)\times\mathbb{R}^d,\\ &V(T,x)=g(x),\end{aligned}\right. \] where \(\mathcal{A}\) is the infinitesimal generator of a diffusion process, by one over a bounded domain with nonhomogeneous Neumann boundary condition, the viscosity solution of which is denoted by \(v\). In order to estimate \(|V(t,x)-v(t,x)|\), \textit{C. Berthelot, M. Bossy} and \textit{D. Talay} [in: J. Akahori (ed.) et al., Stochastic processes and applications to mathematical finance. Proceedings of the Ritsumeikan international symposium, Kusatsu, Shiga, Japan, 2003. River Edge, NJ: World Scientific. 1--25 (2004; Zbl 1191.91052)] used an approach based on the associated stochastic interpretation through a reflected forward stochastic differential equation and a reflected backward stochastic equation. In the present paper, the authors use this stochastic interpretation to provide a stochastic interpretation to the gradient \(\nabla_x v(t,x)\); to this end, they study, in particular, the gradient of the flow of the reflected forward equation mentioned above. Using their stochastic representation of the gradients, the authors estimate \(|\nabla_xV(t,x)-\nabla_xv(t,x0|\).
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stochastic differential equations with refection
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reflected backward stochastic differential equations
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Feynman-Kac formula
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derivatives of flows of reflected SDEs and BSDEs
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