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

DOI10.1016/J.JDE.2022.09.037zbMATH Open1502.60099arXiv2012.14510OpenAlexW3117672045MaRDI QIDQ2097017FDOQ2097017

Authors: Carlo Marinelli, E. Mastrogiacomo, S. Albeverio 

Publication date: 11 November 2022

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

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.

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

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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)

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Cited In (6)

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

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