Mathematical analysis of a nonlinear PDE model for European options with counterparty risk |
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| Authors: | Iñigo Arregui Beatriz Salvador Daniel Ševčovič Carlos Vázquez |
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| Affiliation: | 1. Department of Mathematics, University of A Coruña, Campus de Elviña, 15071 A Coruña, Spain;2. CITIC, Campus de Elviña, 15071 A Coruña, Spain;3. Department of Applied Mathematics and Statistics, Comenius University, Mlynska Dolina, 84248 Bratislava, Slovakia;4. ITMATI, Campus Vida, 15782 Santiago de Compostela, Spain |
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| Abstract: | In this work, we analyze a nonlinear partial differential equation (PDE) model for the total value adjustment on European options in the presence of a counterparty risk. We transform the nonlinear PDE into an equivalent one, involving a sectorial operator, and prove the existence and uniqueness of a solution. |
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