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Long time asymptotics for fully nonlinear Bellman equations: A backward SDE approach

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  • Cosso, Andrea
  • Fuhrman, Marco
  • Pham, Huyên

Abstract

We study the large time behavior of solutions to fully nonlinear parabolic equations of Hamilton–Jacobi–Bellman type arising typically in stochastic control theory with control affecting both drift and diffusion coefficients. We prove that, as time horizon goes to infinity, the long run average solution is characterized by a nonlinear ergodic equation. Our results hold under dissipativity conditions, and without any nondegeneracy assumption on the diffusion term. Our approach uses mainly probabilistic arguments relying on new backward SDE representation for nonlinear parabolic, elliptic and ergodic equations.

Suggested Citation

  • Cosso, Andrea & Fuhrman, Marco & Pham, Huyên, 2016. "Long time asymptotics for fully nonlinear Bellman equations: A backward SDE approach," Stochastic Processes and their Applications, Elsevier, vol. 126(7), pages 1932-1973.
    • Handle: RePEc:eee:spapps:v:126:y:2016:i:7:p:1932-1973
    DOI: 10.1016/j.spa.2015.12.009
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    References listed on IDEAS

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    1. Debussche, Arnaud & Hu, Ying & Tessitore, Gianmario, 2011. "Ergodic BSDEs under weak dissipative assumptions," Stochastic Processes and their Applications, Elsevier, vol. 121(3), pages 407-426, March.
    2. Royer, Manuela, 2006. "Backward stochastic differential equations with jumps and related non-linear expectations," Stochastic Processes and their Applications, Elsevier, vol. 116(10), pages 1358-1376, October.
    3. Robertson, Scott & Xing, Hao, 2015. "Large time behavior of solutions to semi-linear equations with quadratic growth in the gradient," LSE Research Online Documents on Economics 60578, London School of Economics and Political Science, LSE Library.
    4. Ichihara, Naoyuki, 2012. "Large time asymptotic problems for optimal stochastic control with superlinear cost," Stochastic Processes and their Applications, Elsevier, vol. 122(4), pages 1248-1275.
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    Cited by:

    1. Bandini, Elena & Fuhrman, Marco, 2017. "Constrained BSDEs representation of the value function in optimal control of pure jump Markov processes," Stochastic Processes and their Applications, Elsevier, vol. 127(5), pages 1441-1474.
    2. Wing Fung Chong & Ying Hu & Gechun Liang & Thaleia Zariphopoulou, 2019. "An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior," Finance and Stochastics, Springer, vol. 23(1), pages 239-273, January.
    3. Ying Hu & Gechun Liang & Shanjian Tang, 2018. "Systems of ergodic BSDEs arising in regime switching forward performance processes," Papers 1807.01816, arXiv.org, revised Jun 2020.
    4. Fuhrman, Marco & Morlais, Marie-Amélie, 2020. "Optimal switching problems with an infinite set of modes: An approach by randomization and constrained backward SDEs," Stochastic Processes and their Applications, Elsevier, vol. 130(5), pages 3120-3153.
    5. Arapostathis, Ari & Pang, Guodong & Zheng, Yi, 2020. "Ergodic control of diffusions with compound Poisson jumps under a general structural hypothesis," Stochastic Processes and their Applications, Elsevier, vol. 130(11), pages 6733-6756.
    6. Bandini, Elena & Cosso, Andrea & Fuhrman, Marco & Pham, Huyên, 2019. "Randomized filtering and Bellman equation in Wasserstein space for partial observation control problem," Stochastic Processes and their Applications, Elsevier, vol. 129(2), pages 674-711.

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