A quasi-sure approach to the control of non-Markovian stochastic differential equations

DOI10.1214/EJP.V17-1892zbMATH Open1244.93176arXiv1106.3273MaRDI QIDQ428636FDOQ428636

Marcel Nutz

Publication date: 22 June 2012

Published in: Electronic Journal of Probability (Search for Journal in Brave)

Abstract: We study stochastic differential equations (SDEs) whose drift and diffusion coefficients are path-dependent and controlled. We construct a value process on the canonical path space, considered simultaneously under a family of singular measures, rather than the usual family of processes indexed by the controls. This value process is characterized by a second order backward SDE, which can be seen as a non-Markovian analogue of the Hamilton-Jacobi-Bellman partial differential equation. Moreover, our value process yields a generalization of the G-expectation to the context of SDEs.

Full work available at URL: https://arxiv.org/abs/1106.3273

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zbMATH Keywords

stochastic optimal controlvolatility uncertaintyrisk measureG-expectationnon-Markovian SDErandom G-expectationsecond order BSDE

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Dynamic programming in optimal control and differential games (49L20) Martingales with continuous parameter (60G44) Optimal stochastic control (93E20)

Cited In (19)

• The maximum principle for stochastic differential systems with general cost functional
• Viscosity solutions of fully nonlinear parabolic path dependent PDEs. I.
• Second-order BSDEs with jumps: formulation and uniqueness
• Path‐dependent Hamilton–Jacobi–Bellman equations related to controlled stochastic functional differential systems
• A pseudo-Markov property for controlled diffusion processes
• Good deal hedging and valuation under combined uncertainty about drift and volatility
• Maximum principle for forward–backward SDEs with a general cost functional
• Ambiguous volatility, possibility and utility in continuous time
• Probabilistic interpretation for solutions of fully nonlinear stochastic pdes
• A stochastic recursive optimal control problem under the G-expectation framework
• Measurability of semimartingale characteristics with respect to the probability law
• Controlling mean exit time of stochastic dynamical systems based on quasipotential and machine learning
• Constructing sublinear expectations on path space
• Optimal stopping under adverse nonlinear expectation and related games
• Randomized and backward SDE representation for optimal control of non-Markovian SDEs
• Optimal contracting under mean-volatility joint ambiguity uncertainties
• Backward nonlinear expectation equations
• Robust maximization of asymptotic growth under covariance uncertainty
• Robust superhedging with jumps and diffusion

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