Backward stochastic differential equations with non-Markovian singular terminal values

DOI10.1142/S0219493719500060MaRDI QIDQ5384774zbMATH OpenOpenAlexFDO

Authors Ali Devin Sezer, Thomas Kruse, Alexandre Popier

Publication date 25 June 2019

Published in Stochastics and Dynamics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1611.09022

zbMATH Keywords

backward stochastic differential equationsnon-Markovian terminal conditionsreaction-diffusion equationssingularity

Mathematics Subject Classification ID

Reaction-diffusion equations (35K57) Singular parabolic equations (35K67) Stopping times; optimal stopping problems; gambling theory (60G40) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30) Brownian motion (60J65)

Abstract: We solve a class of BSDE with a power function $f(y)=y^q$, $q>1$, driving its drift and with the terminal boundary condition $xi=inftycdotmathbf{1}_{B(m,r{)}^c}$ (for which $q>2$ is assumed) or $xi=inftycdotmathbf{1}_{B(m,r)}$, where $B(m,r)$ is the ball in the path space $C([0,T])$ of the underlying Brownian motion centered at the constant function $m$ and radius $r$. The solution involves the derivation and solution of a related heat equation in which $f$ serves as a reaction term and which is accompanied by singular and discontinuous Dirichlet boundary conditions. Although the solution of the heat equation is discontinuous at the corners of the domain the BSDE has continuous sample paths with the prescribed terminal value.

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Cited in

(12)

• Asymptotic approach for backward stochastic differential equation with singular terminal condition
• The link between stochastic differential equations with non-Markovian coefficients and backward stochastic partial differential equations
• Backward stochastic differential equations with non-Markovian singular terminal conditions for general driver and filtration
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