The Skorokhod embedding problem for inhomogeneous diffusions

DOI10.1214/19-AIHP1012zbMATH Open1466.60082arXiv1810.05098OpenAlexW3037755240MaRDI QIDQ2227461FDOQ2227461

Gonçalo dos Reis, Alexander Fromm, Stefan Engelhardt, Stefan Ankirchner

Publication date: 15 February 2021

Published in: Annales de l'Institut Henri Poincaré. Probabilités et Statistiques (Search for Journal in Brave)

Abstract: We solve the Skorokhod embedding problem for a class of stochastic processes satisfying an inhomogeneous stochastic differential equation (SDE) of the form $d{A}_t=mu(t,A_t)dt+sigma(t,A_t)d{W}_t$. We provide sufficient conditions guaranteeing that for a given probability measure $u$ on $mathbbR$ there exists a bounded stopping time $au$ and a real $a$ such that the solution $(A_t)$ of the SDE with initial value $a$ satisfies $A_{a}usimu$. We hereby distinguish the cases where $(A_t)$ is a solution of the SDE in a weak or strong sense. Our construction of embedding stopping times is based on a solution of a fully coupled forward-backward SDE. We use the so-called method of decoupling fields for verifying that the FBSDE has a unique solution. Finally, we sketch an algorithm for putting our theoretical construction into practice and illustrate it with a numerical experiment.

Full work available at URL: https://arxiv.org/abs/1810.05098

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zbMATH Keywords

Brownian motionforward-backward stochastic differential equationLevy processesSkorokhod embeddingfunctional dependencedecoupling fields

Mathematics Subject Classification ID

Continuous-time Markov processes on general state spaces (60J25) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stopping times; optimal stopping problems; gambling theory (60G40)

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Cited In (9)

• Discretisation and duality of optimal Skorokhod embedding problems
• Statistical Skorohod embedding problem: optimality and asymptotic normality
• The Skorokhod embedding problem and its offspring
• Numerical approximation of irregular SDEs via Skorokhod embeddings
• Skorokhod Embedding by Randomized Hitting Times
• Conformal Skorokhod embeddings and related extremal problems
• An optimal Skorokhod embedding for diffusions
• On the Root Solution to the Skorokhod Embedding Problem Given Full Marginals
• On the continuity of the root barrier

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