Singular perturbations and asymptotic expansions for SPDEs with an application to term structure models

DOI10.1016/J.JDE.2022.09.037MaRDI QIDQ2097017zbMATHOpenAlexFDO

Authors Carlo Marinelli, E. Mastrogiacomo, S. Albeverio

Publication date 11 November 2022

Published in Journal of Differential Equations (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2012.14510

zbMATH Keywords

asymptotic expansionsinterest rate modelssingular perturbationsstochastic PDE

Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91)

Abstract: We study the dependence of mild solutions to linear stochastic evolution equations on Hilbert space driven by Wiener noise, with drift having linear part of the type $A+varepsilonG$, on the parameter $varepsilon$. In particular, we study the limit and the asymptotic expansions in powers of $varepsilon$ of these solutions, as well as of functionals thereof, as $varepsilono0$, with good control on the remainder. These convergence and series expansion results are then applied to a parabolic perturbation of the Musiela SPDE of mathematical finance modeling the dynamics of forward rates.

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Cited in

(6)

• Asymptotic expansions for SDE's with small multiplicative noise
• Proof of non-convergence of the short-maturity expansion for the SABR model
• Small perturbation of stochastic parabolic equations: A power series analysis
• Asymptotic expansion for a filtering problem and a short term rate model
• Singular integrals of subordinators with applications to structural properties of SPDEs
• Hogan–Weintraub singularity and explosive behaviour in the Black–Derman–Toy model

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