BSDEs with Singular Terminal Condition and a Control Problem with Constraints

DOI10.1137/130923518MaRDI QIDQ5494901zbMATH OpenOpenAlexFDO

Authors Stefan Ankirchner, Thomas Kruse, Monique Jeanblanc

Publication date 30 July 2014

Published in SIAM Journal on Control and Optimization (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1305.6541

zbMATH Keywords

backward stochastic differential equationmaximum principleoptimal liquidationsingular terminal conditionstochastic control with constraints

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Abstract: We provide a probabilistic solution of a not necessarily Markovian control problem with a state constraint by means of a Backward Stochastic Differential Equation (BSDE). The novelty of our solution approach is that the BSDE possesses a singular terminal condition. We prove that a solution of the BSDE exists, thus partly generalizing existence results obtained by Popier in [7] and [8]. We perform a verification and discuss special cases for which the control problem has explicit solutions.

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(43)

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