Penalization methods for the Skorokhod problem and reflecting SDEs with jumps

Abstract

We study the problem of approximation of solutions of the Skorokhod problem and reflecting stochastic differential equations (SDEs) with jumps by sequences of solutions of equations with penalization terms. Applications to discrete approximation of weak and strong solutions of reflecting SDEs are given. Our proofs are based on new estimates for solutions of equations with penalization terms and the theory of convergence in the Jakubowski $S$-topology.