Weak Dirichlet processes with a stochastic control perspective

DOI10.1016/J.SPA.2006.04.009MaRDI QIDQ855923zbMATH OpenOpenAlexFDO

Authors Fausto Gozzi, Francesco Russo

Publication date 7 December 2006

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0604326

zbMATH Keywords

Hamilton-Jacobi-Bellman equationCauchy problem for parabolic partial differential equationFukushima-Dirichlet decompositionstochastic calculus via regularizationItô formula

Mathematics Subject Classification ID

Stochastic integrals (60H05) Foundations of stochastic processes (60G05)

Abstract: The motivation of this paper is to prove verification theorems for stochastic optimal control of finite dimensional diffusion processes without control in the diffusion term, in the case that the value function is assumed to be continuous in time and once differentiable in the space variable ($C^{0,1}$) instead of once differentiable in time and twice in space ($C^{1,2}$), like in the classical results. For this purpose, the replacement tool of the It^{o} formula will be the Fukushima-Dirichlet decomposition for weak Dirichlet processes. Given a fixed filtration, a weak Dirichlet process is the sum of a local martingale $M$ plus an adapted process $A$ which is orthogonal, in the sense of covariation, to any continuous local martingale. The mentioned decomposition states that a $C^{0,1}$ function of a weak Dirichlet process with finite quadratic variation is again a weak Dirichlet process. That result is established in this paper and it is applied to the strong solution of a Cauchy problem with final condition. Applications to the proof of verification theorems will be addressed in a companion paper.

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Cited in

(26)

• A fully backward representation of semilinear PDEs applied to the control of thermostatic loads in power systems
• Natural decomposition of processes and weak Dirichlet processes
• A Feynman-Kac result via Markov BSDEs with generalised drivers
• Generalized covariation and extended Fukushima decomposition for Banach space-valued processes: applications to windows of Dirichlet processes
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