Optimal stopping of a Hilbert space valued diffusion: an infinite dimensional variational inequality

DOI10.1007/S00245-015-9302-8zbMATH Open1338.60116arXiv1207.0720OpenAlexW2104260102WikidataQ61833293 ScholiaQ61833293MaRDI QIDQ282076FDOQ282076

Authors: Maria B. Chiarolla, Tiziano De Angelis 

Publication date: 12 May 2016

Published in: Applied Mathematics and Optimization (Search for Journal in Brave)

Abstract: A finite horizon optimal stopping problem for an infinite dimensional diffusion $X$ is analyzed by means of variational techniques. The diffusion is driven by a SDE on a Hilbert space $mathcalH$ with a non-linear diffusion coefficient $sigma(X)$ and a generic unbounded operator $A$ in the drift term. When the gain function $Theta$ is time-dependent and fulfils mild regularity assumptions, the value function $mathcalU$ of the optimal stopping problem is shown to solve an infinite-dimensional, parabolic, degenerate variational inequality on an unbounded domain. Once the coefficient $sigma(X)$ is specified, the solution of the variational problem is found in a suitable Banach space $mathcalV$ fully characterized in terms of a Gaussian measure $mu$. This work provides the infinite-dimensional counterpart, in the spirit of Bensoussan and Lions cite{Ben-Lio82}, of well-known results on optimal stopping theory and variational inequalities in $mathbb{R}^n$. These results may be useful in several fields, as in mathematical finance when pricing American options in the HJM model.

Full work available at URL: https://arxiv.org/abs/1207.0720

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zbMATH Keywords

optimal stoppingHilbert space valued diffusioninfinite-dimensional stochastic analysisparabolic degenerate variational inequalities

Mathematics Subject Classification ID

Diffusion processes (60J60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Variational inequalities (49J40) Stopping times; optimal stopping problems; gambling theory (60G40) PDEs on infinite-dimensional (e.g., function) spaces (= PDEs in infinitely many variables) (35R15)

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Cited In (11)

• Optimal dividends with partial information and stopping of a degenerate reflecting diffusion
• Zero-sum stopper versus singular-controller games with constrained control directions
• Variational inequalities in Hilbert spaces with measures and optimal stopping problems
• L p Inequalities for Stopping Times of Diffusions
• Optimal dividend payout under stochastic discounting
• On the approximation of infinite dimensional optimal stopping problems with application to mathematical finance
• Analytical pricing of American put options on a zero coupon bond in the Heath-Jarrow-Morton model
• Baxter-Chacon topology and vector-valued optimal stopping problems
• A Singular Stochastic Control Problem with Interconnected Dynamics
• Explicit formula for evolution semigroup for diffusion in Hilbert space
• Global \(C^1\) regularity of the value function in optimal stopping problems

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