Diffusive limit approximation of pure-jump optimal stochastic control problems

DOI10.1007/S10957-022-02135-7MaRDI QIDQ6371138arXivFDO

Authors Marc Abeille, Bruno Bouchard, Lorenzo Croissant

Publication date 24 June 2021

Published in arXiv

Full work available at URL https://doi.org/10.1007/S10957-022-02135-7

Mathematics Subject Classification ID

Jump processes on discrete state spaces (60J74) Auctions, bargaining, bidding and selling, and other market models (91B26) Optimal stochastic control (93E20)

arXiv classification

math.OC

Abstract: We consider the diffusive limit of a typical pure-jump Markovian control problem as the intensity of the driving Poisson process tends to infinity. We show that the convergence speed is provided by the H"older constant of the Hessian of the limit problem, and explain how correction terms can be constructed. This provides an alternative efficient method for the numerical approximation of the optimal control of a pure-jump problem in situations with very high intensity of jump. We illustrate this approach in the context of a display advertising auction problem.

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