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Pathwise Stochastic Control and a Class of Stochastic Partial Differential Equations

Author

Listed:
  • Neeraj Bhauryal

    (Univ. de Lisboa)

  • Ana Bela Cruzeiro

    (Instituto Superior Técnico)

  • Carlos Oliveira

    (NTNU
    Univ. de Lisboa, Research in Economics and Mathematics, CEMAPRE)

Abstract

In this article, we study a stochastic optimal control problem in the pathwise sense, as initially proposed by Lions and Souganidis in [C. R. Acad. Sci. Paris Ser. I Math., 327 (1998), pp. 735-741]. The corresponding Hamilton-Jacobi-Bellman (HJB) equation, which turns out to be a non-adapted stochastic partial differential equation, is analyzed. Making use of the viscosity solution framework, we show that the value function of the optimal control problem is the unique solution of the HJB equation. When the optimal drift is defined, we provide its characterization. Finally, we describe the associated conserved quantities, namely the space-time transformations leaving our pathwise action invariant.

Suggested Citation

  • Neeraj Bhauryal & Ana Bela Cruzeiro & Carlos Oliveira, 2024. "Pathwise Stochastic Control and a Class of Stochastic Partial Differential Equations," Journal of Optimization Theory and Applications, Springer, vol. 203(2), pages 1967-1990, November.
    • Handle: RePEc:spr:joptap:v:203:y:2024:i:2:d:10.1007_s10957-024-02553-9
    DOI: 10.1007/s10957-024-02553-9
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    References listed on IDEAS

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    1. Buckdahn, Rainer & Ma, Jin, 2001. "Stochastic viscosity solutions for nonlinear stochastic partial differential equations. Part II," Stochastic Processes and their Applications, Elsevier, vol. 93(2), pages 205-228, June.
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    3. Rama Cont, 2005. "Modeling Term Structure Dynamics: An Infinite Dimensional Approach," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 357-380.
    4. Irgens, Christian & Paulsen, Jostein, 2004. "Optimal control of risk exposure, reinsurance and investments for insurance portfolios," Insurance: Mathematics and Economics, Elsevier, vol. 35(1), pages 21-51, August.
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