The Skorokhod embedding problem for inhomogeneous diffusions

DOI10.1214/19-AIHP1012MaRDI QIDQ2227461zbMATH OpenOpenAlexFDO

Authors Stefan Ankirchner, Stefan Engelhardt, Alexander Fromm, Gonçalo dos Reis

Publication date 15 February 2021

Published in Annales de l'Institut Henri Poincaré. Probabilités et Statistiques (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1810.05098, https://projecteuclid.org/euclid.aihp/1593137304

zbMATH Keywords

Brownian motionforward-backward stochastic differential equationLevy processesSkorokhod embeddingfunctional dependencedecoupling fields

Mathematics Subject Classification ID

Continuous-time Markov processes on general state spaces (60J25) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stopping times; optimal stopping problems; gambling theory (60G40)

Abstract: We solve the Skorokhod embedding problem for a class of stochastic processes satisfying an inhomogeneous stochastic differential equation (SDE) of the form $d{A}_t=mu(t,A_t)dt+sigma(t,A_t)d{W}_t$. We provide sufficient conditions guaranteeing that for a given probability measure $u$ on $mathbbR$ there exists a bounded stopping time $au$ and a real $a$ such that the solution $(A_t)$ of the SDE with initial value $a$ satisfies $A_{a}usimu$. We hereby distinguish the cases where $(A_t)$ is a solution of the SDE in a weak or strong sense. Our construction of embedding stopping times is based on a solution of a fully coupled forward-backward SDE. We use the so-called method of decoupling fields for verifying that the FBSDE has a unique solution. Finally, we sketch an algorithm for putting our theoretical construction into practice and illustrate it with a numerical experiment.

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Cited in

(11)

• Discretisation and duality of optimal Skorokhod embedding problems
• The Skorokhod embedding problem and its offspring
• On Skorokhod embeddings and Poisson equations
• An FBSDE approach to the Skorokhod embedding problem for Gaussian processes with non-linear drift
• Conformal Skorokhod embeddings and related extremal problems
• On the Root Solution to the Skorokhod Embedding Problem Given Full Marginals
• Statistical Skorohod embedding problem: optimality and asymptotic normality
• An optimal Skorokhod embedding for diffusions
• Skorokhod Embedding by Randomized Hitting Times
• Numerical approximation of irregular SDEs via Skorokhod embeddings
• On the continuity of the Root barrier

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