Optimal Control Problems of Fully Coupled FBSDEs and Viscosity Solutions of Hamilton--Jacobi--Bellman Equations

DOI10.1137/100816778zbMATH Open1295.93076arXiv1302.0935OpenAlexW2157267966MaRDI QIDQ3192136FDOQ3192136

Juan Li, Qingmeng Wei

Publication date: 26 September 2014

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

Abstract: In this paper we study stochastic optimal control problems of fully coupled forward-backward stochastic differential equations (FBSDEs). The recursive cost functionals are defined by controlled fully coupled FBSDEs. We study two cases of diffusion coefficients $sigma$ of FSDEs. We use a new method to prove that the value functions are deterministic, satisfy the dynamic programming principle (DPP), and are viscosity solutions to the associated generalized Hamilton-Jacobi-Bellman (HJB) equations. The associated generalized HJB equations are related with algebraic equations when $sigma$ depends on the second component of the solution $(Y,Z)$ of the BSDE and doesn't depend on the control. For this we adopt Peng's BSDE method, and so in particular, the notion of stochastic backward semigroup in [16]. We emphasize that the fact that $sigma$ also depends on $Z$ makes the stochastic control much more complicate and has as consequence that the associated HJB equation is combined with an algebraic equation, which is inspired by Wu and Yu [19]. We use the continuation method combined with the fixed point theorem to prove that the algebraic equation has a unique solution, and moreover, we also give the representation for this solution. On the other hand, we prove some new basic estimates for fully coupled FBSDEs under the monotonic assumptions. In particular, we prove under the Lipschitz and linear growth conditions that fully coupled FBSDEs have a unique solution on the small time interval, if the Lipschitz constant of $sigma$ with respect to $z$ is sufficiently small. We also establish a generalized comparison theorem for such fully coupled FBSDEs.

Full work available at URL: https://arxiv.org/abs/1302.0935

zbMATH Keywords

viscosity solutiondynamic programming principlevalue functionsstochastic backward semigroupfully coupled FBSDEs

Mathematics Subject Classification ID

Dynamic programming (90C39) Optimal stochastic control (93E20)

Cited In (28)

• Mean-field forward-backward doubly stochastic differential equations and related nonlocal stochastic partial differential equations
• Singular optimal controls of stochastic recursive systems and Hamilton-Jacobi-Bellman inequality
• Dynamic programming principle and viscosity solutions of Hamilton-Jacobi-Bellman equations for stochastic recursive control problem with non-Lipschitz generator
• Dynamic programming principle and Hamilton-Jacobi-Bellman equation under nonlinear expectation
• Arrow sufficient conditions for optimality of fully coupled forward-backward stochastic differential equations with applications to finance
• Probabilistic interpretation of a system of coupled Hamilton-Jacobi-Bellman-Isaacs equations
• Stochastic differential games for fully coupled FBSDEs with jumps
• A class of stochastic Fredholm-algebraic equations and applications in finance
• Sobolev space weak solutions to one kind of quasilinear parabolic partial differential equations related to forward-backward stochastic differential equations
• Stochastic maximum principle, dynamic programming principle, and their relationship for fully coupled forward-backward stochastic controlled systems
• \(L^p\)-estimate for linear forward-backward stochastic differential equations
• An exploration of \(L^p\)-theory for forward-backward stochastic differential equations with random coefficients on small durations
• Active learning based sampling for high-dimensional nonlinear partial differential equations
• \(L^p\) estimates for fully coupled FBSDEs with jumps
• General fully coupled FBSDES involving the value function and related nonlocal HJB equations combined with algebraic equations
• Existence of an optimal control for a coupled FBSDE with a non degenerate diffusion coefficient
• $L^p$-theory of forward-backward stochastic differential equations
• \( L^p\) estimations of fully coupled FBSDEs
• Stochastic representation for solutions of a system of coupled HJB-Isaacs equations with integral-differential operators
• Existence of an optimal control for a system driven by a degenerate coupled forward-backward stochastic differential equations
• Fully coupled forward-backward SDEs involving the value function and associated nonlocal Hamilton-Jacobi-Bellman equations
• Zero-sum stochastic differential games of impulse versus continuous control by FBSDEs
• A probabilistic approach to quasilinear parabolic PDEs with obstacle and Neumann problems
• A representation theorem approach to probabilistic interpretation for viscosity solutions of Isaacs equations
• Probabilistic interpretation for a system of quasilinear parabolic partial differential equation combined with algebra equations
• Probabilistic interpretation of HJB equations by the representation theorem for generators of BSDEs
• The risk-sensitive maximum principle for controlled forward-backward stochastic differential equations
• The Existence and Uniqueness of Viscosity Solution to a Kind of Hamilton--Jacobi--Bellman Equation

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