Convex duality for stochastic singular control problems

DOI10.1214/16-AAP1209MaRDI QIDQ525303zbMATH OpenFDO

Authors Helena Kauppila, Peter Bank

Publication date 3 May 2017

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1407.7717

zbMATH Keywords

convex dualityincomplete marketsirreversible investmentsingular controlutility maximization

Mathematics Subject Classification ID

Applications of functional analysis in optimization, convex analysis, mathematical programming, economics (46N10) Individual preferences (91B08) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Abstract: We develop a general theory of convex duality for certain singular control problems, taking the abstract results by Kramkov and Schachermayer (1999) for optimal expected utility from nonnegative random variables to the level of optimal expected utility from increasing, adapted controls. The main contributions are the formulation of a suitable duality framework, the identification of the problem's dual functional as well as the full duality for the primal and dual value functions and their optimizers. The scope of our results is illustrated by an irreversible investment problem and the Hindy-Huang-Kreps utility maximization problem for incomplete financial markets.

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Cited in

(15)

• Convex integral functionals of regular processes
• Linearisation techniques and the dual algorithm for a class of mixed singular/continuous control problems in reinsurance. I: Theoretical aspects
• Optimal investment and consumption with labor income in incomplete markets
• Continuous-time duality for superreplication with transient price impact
• Convex duality in stochastic optimization and mathematical finance
• Convex Duality Approach to the Optimal Control of Diffusions
• Convex duality theory for optimal investment
• Convex duality for Epstein-Zin stochastic differential utility
• Stability of the indirect utility process
• Optimal consumption with Hindy–Huang–Kreps preferences under nonlinear expectations
• Utility maximization with ratchet and drawdown constraints on consumption in incomplete semimartingale markets
• Viscosity solutions of obstacle equations by inhomogeneous convex envelopes
• A mean-field version of Bank-El Karoui's representation of stochastic processes
• Irreversible consumption habit under ambiguity: singular control and optimal G-stopping time
• Duality theorem for the stochastic optimal control problem

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