I am trying to redemonstrate the dynamical programming equation and the compact formulation of the multiple-payoff problem given in the Appendix of the paper of Avellaneda on pricing and hedging derivative under the Uncertain Volatility Model (UVM).


Avellaneda, Levy, Paras: Pricing and Hedging Derivative Securities in Markets with Uncertain Volatilities, 1995

Does anyone understand how the BSB PDE (cf. eq 33) was deduced?



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