On backward stochastic differential equations approach to valuation of American options
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differentialamericanbackwardequationoptionssolutionsomestochastic
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We consider the problem of valuation of American (call and put) options written on a dividend paying stock governed by the geometric Brownian motion. We show that the value function has two different but related representations: by means of a solution of some nonlinear backward stochastic differential equation and weak solution to some semilinear partial differential equation.
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