On a Class of Path-Dependent Singular Stochastic Control Problems

DOI10.1137/17M1114235MaRDI QIDQ4684782zbMATH OpenOpenAlexFDO

Authors Romuald Elie, L. Moreau, Dylan Possamaï

Publication date 25 September 2018

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

Full work available at URL https://arxiv.org/abs/1701.08861

zbMATH Keywords

constrained BSDEspath-dependent PDEsregularitysingular controltransaction costsviscosity solutions

Mathematics Subject Classification ID

Dynamic programming in optimal control and differential games (49L20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Abstract: This paper studies a class of non$-$Markovian singular stochastic control problems, for which we provide a novel probabilistic representation. The solution of such control problem is proved to identify with the solution of a $Z-$constrained BSDE, with dynamics associated to a non singular underlying forward process. Due to the non$-$Markovian environment, our main argumentation relies on the use of comparison arguments for path dependent PDEs. Our representation allows in particular to quantify the regularity of the solution to the singular stochastic control problem in terms of the space and time initial data. Our framework also extends to the consideration of degenerate diffusions, leading to the representation of the solution as the infimum of solutions to $Z-$constrained BSDEs. As an application, we study the utility maximisation problem with transaction costs for non$-$Markovian dynamics.

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Cited in

(8)

• Equilibrium asset pricing with transaction costs
• On a class of singular stochastic control problems driven by Lévy noise
• Bank monitoring incentives under moral hazard and adverse selection
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• A singular control problem with an expected and a pathwise ergodic performance criterion

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