Stochastic Perron's method for the probability of lifetime ruin problem under transaction costs

DOI10.1137/140967052MaRDI QIDQ2810052zbMATH OpenOpenAlexFDO

Authors Erhan Bayraktar, Yuchong Zhang

Publication date 31 May 2016

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

Full work available at URL https://arxiv.org/abs/1404.7406

zbMATH Keywords

comparison principletransaction costsviscosity solutionssingular controlstochastic Perron methodHamilton-Jacobi-Bellman variational inequalityprobability of lifetime ruin

Mathematics Subject Classification ID

Viscosity solutions to PDEs (35D40) PDEs in connection with control and optimization (35Q93) Variational inequalities (49J40) Existence of optimal solutions to problems involving randomness (49J55) Dynamic programming in optimal control and differential games (49L20) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Applications of stochastic analysis (to PDEs, etc.) (60H30) Optimal stochastic control (93E20) Martingales and classical analysis (60G46)

Abstract: We apply stochastic Perron's method to a singular control problem where an individual targets at a given consumption rate, invests in a risky financial market in which trading is subject to proportional transaction costs, and seeks to minimize her probability of lifetime ruin. Without relying on the dynamic programming principle (DPP), we characterize the value function as the unique viscosity solution of an associated Hamilton-Jacobi-Bellman (HJB) variational inequality. We also provide a complete proof of the comparison principle which is the main assumption of stochastic Perron's method.

Recommendations

• Proving regularity of the minimal probability of ruin via a game of stopping and control
• Minimizing the probability of lifetime ruin: two riskless assets with transaction costs
• Minimizing the probability of lifetime ruin under stochastic volatility
• Minimizing the ruin probability allowing investments in two assets: a two-dimensional problem
• Stochastic Perron's method for Hamilton-Jacobi-Bellman equations

Cited in

(17)

• On the controller-stopper problems with controlled jumps
• Minimizing the discounted probability of exponential Parisian ruin via reinsurance
• Lifetime ruin under high-water mark fees and drift uncertainty
• Convergence of optimal investment problems in the vanishing fixed cost limit
• Annuitizing at a bounded, absolutely continuous rate to minimize the probability of lifetime ruin
• Stochastic Perron for stochastic target games
• A general verification result for stochastic impulse control problems
• Optimal entry and consumption under habit formation
• Regular finite fuel stochastic control problems with exit time
• Solvability of the Nonlinear Dirichlet Problem with Integro-differential Operators
• A simple and nearly optimal investment strategy to minimize the probability of lifetime ruin
• Minimizing the probability of lifetime ruin: two riskless assets with transaction costs
• Proving regularity of the minimal probability of ruin via a game of stopping and control
• On dynamic pricing under model uncertainty
• Minimizing the probability of lifetime exponential Parisian ruin
• Robust feedback switching control: dynamic programming and viscosity solutions
• Finite-horizon optimal investment with transaction costs: construction of the optimal strategies

This page was built for publication: Stochastic Perron's method for the probability of lifetime ruin problem under transaction costs

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2810052)