Sharp regularity near an absorbing boundary for solutions to second order SPDEs in a half-line with constant coefficients

DOI10.1007/S40072-013-0023-1zbMATH Open1310.60098arXiv1303.6894OpenAlexW2116603570MaRDI QIDQ744172FDOQ744172

Authors: Sean Ledger 

Publication date: 6 October 2014

Published in: Stochastic and Partial Differential Equations. Analysis and Computations (Search for Journal in Brave)

Abstract: We prove that the weak version of the SPDE problem �egin{align*} dV_{t}(x) & = [-mu V_{t}'(x) + frac{1}{2} (sigma_{M}^{2} + sigma_{I}^{2})V_{t}"(x)]dt - sigma_{M} V_{t}'(x)dW^{M}_{t}, quad x > 0, \ V_{t}(0) &= 0 end{align*} with a specified bounded initial density, $V_0$, and $W$ a standard Brownian motion, has a unique solution in the class of finite-measure valued processes. The solution has a smooth density process which has a probabilistic representation and shows degeneracy near the absorbing boundary. In the language of weighted Sobolev spaces, we describe the precise order of integrability of the density and its derivatives near the origin, and we relate this behaviour to a two-dimensional Brownian motion in a wedge whose angle is a function of the ratio $sigm{a}_M/sigm{a}_I$. Our results are sharp: we demonstrate that better regularity is unattainable.

Full work available at URL: https://arxiv.org/abs/1303.6894

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zbMATH Keywords

regularitystochastic partial differential equationabsorbing boundary

Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15)

Cites Work

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Cited In (7)

• An SPDE model for systemic risk with endogenous contagion
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• Stochastic PDEs for large portfolios with general mean-reverting volatility processes
• A stochastic partial differential equation model for the pricing of mortgage-backed securities
• An SPDE with Robin-type boundary for a system of elastically killed diffusions on the positive half-line
• Fast mean-reversion asymptotics for large portfolios of stochastic volatility models
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