Applied stochastic control of jump diffusions (Q5915957)

This is the third edition of the famous book ``Applied stochastic control of jump diffusions'' by two renowned specialists B. Øksendal and A. Sulem (see the reviews of the first and second edition in [Zbl 1074.93009; Zbl 1116.93004]). This area has experienced some of the most remarkable developments after the second edition and the authors updated the content. The authors mainly focus on the optimal control problems for systems governed by stochastic differential equations driven by Levy processes. Such systems are natural generalizations of stochastic differential equations driven by Wiener processes. As the name suggested, the authors emphasize practical problems, such as control problems from financial markets. On the other hand, the authors keep all the content rigorously. The authors present the most important and useful solution methods of various types of stochastic control problems, including the dynamic programming method and the stochastic maximum principle method, as well as the relation between them. The book is very well written, and will undoubtedly remain a major reference on the topic for years to come. It is an authoritative book which should be of interest to researchers in stochastic control, mathematical finance and applied mathematics. Material out of this book could also be used in graduate courses on stochastic control in mathematics and finance curricula. The book is divided into 14 chapters. In Chapter 1, a concise and well-written introduction to stochastic calculus with Lévy processes is given, which even can be used as a text for beginners who are interested in this topic itself rather than the control problem. In Chapter 2, financial markets modeled by jump diffusions are discussed. This provides the main motivation of the problem studied in this book. In Chapter 3, optimal stopping of jump diffusions is studied. Chapter 4 is devoted to backward stochastic differential equations with jumps. Besides its application the rest of this book, the topic itself is very interesting. Chapter 5 contains one of the main content of this book; say the dynamic programming method, the stochastic maximum principle method and their relationship. Chapter 6 is addressed to stochastic differential games. The part for mean field game is very new and interesting. In Chapter 7, the authors consider the problem of combined optimal stopping and stochastic control of jump diffusions. Chapters 8 and 9 are devoted to singular control for jump diffusions and impulse control of jump diffusions, respectively. In Chapter 10, the authors give the reduction of impulse control problem to a sequence of iterated optimal stopping problems. It is useful in numerical applications. In Chapter 11, the authors consider the problem of combined stochastic control and impulse control of jump diffusions. Chapter 12 addresses the viscosity solutions, which are very useful tools in optimal control. The authors first prove the uniqueness of the viscosity solution. Then they give some numerical analysis of such solutions. Chapters 13 are devoted to optimal control of stochastic partial differential equations and partial observation control problem. At last, in Chapter 14, solutions of selected exercises are provided. One of the main distinguishing features of this book is that it provides plenty of interesting exercises originated from financial market. It is very helpful for both beginners. I wish I had done these exercise when I was a student!