Download e-book for kindle: Applied Stochastic Control of Jump Diffusions by Bernt Øksendal, Agnès Sulem

By Bernt Øksendal, Agnès Sulem

ISBN-10: 3540140239

ISBN-13: 9783540140238

ISBN-10: 3540264418

ISBN-13: 9783540264415

The major function of the ebook is to offer a rigorous, but regularly nontechnical, advent to an important and worthwhile resolution tools of varied different types of stochastic regulate difficulties for leap diffusions (i.e. options of stochastic differential equations pushed via L?vy strategies) and its purposes.

The forms of regulate difficulties coated comprise classical stochastic regulate, optimum preventing, impulse regulate and singular keep an eye on. either the dynamic programming approach and the utmost precept process are mentioned, in addition to the relation among them. Corresponding verification theorems regarding the Hamilton-Jacobi Bellman equation and/or (quasi-)variational inequalities are formulated. There also are chapters at the viscosity resolution formula and numerical equipment.

The textual content emphasises functions, typically to finance. the entire major effects are illustrated by means of examples and workouts appear at the top of every bankruptcy with entire strategies. it will support the reader comprehend the idea and spot the right way to follow it.
The ebook assumes a few simple wisdom of stochastic research, degree thought and partial differential equations.

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N (t)), where t ηi (t) = ai + 0 R zi Ni (dt, dzi ) ; 1 ≤ i ≤ n are independent 1-dimensional pure jump L´evy processes and a = (a1 , . . , an ) n ∈ K is constant. We assume that 0 < E (ηi (t) − ai )2 < ∞ for all t > 0. i=1 a) Find the generator A of η(·) and show that if f (x) = |x|2 then n Af (x) = i=1 R |ζ|2 νi (dζ) := ρ(n) ∈ (0, ∞) (constant). 24 1 Stochastic Calculus with Jump diffusions b) Let τ = inf{t > 0 ; η(t) ∈ K} ≤ ∞ and put τk = τ ∧ k ; k = 1, 2, . . 2 n Let {fm }∞ m=1 be a sequence of functions in C (R ) such that fm (x) = |x|2 for |x| ≤ R, 0 ≤ fm (x) ≤ 2R2 for all x ∈ R, 1 for all m and supp fm ⊂ x ∈ Rn ; |x| ≤ R + m fm (x) → |x|2 · χK (x) as m → ∞, for all x ∈ Rn .

An introduction to these topics separately can be found in [Ø1]. 2. 1 (An optimal resource extraction control and stopping problem). g. e. s. ν. Let Qt denote the amount of remaining resources at time t. If we extract the resources at the “intensity” ut = ut (ω) ∈ [0, m] at time t, then the dynamics of Qt is Q0 = q ≥ 0 . 2) dQt = −ut Qt dt ; (m is a constant giving the maximal intensity). We assume as before that our control ut (ω) is adapted to the filtration {F }t≥0 .

2 The maximum principle Suppose the state X(t) = X (u) (t) of a controlled jump diffusion in Rn is given by dX(t) =b(t, X(t), u(t))dt + σ(t, X(t), u(t))dB(t) γ(t, X(t− ), u(t− ), z)N (dt, dz). 2 The maximum principle x2 47 ν>0 (jump Merton line) ν = 0 (classical Merton line) x2 = θ∗ x 1−θ ∗ 1 x2 = θ0 x 1−θ0 1 0 x1 Fig. 2. The Merton line for ν = 0 and ν > 0 As before N (dt, dz) = (N1 (dt, dz1 ), . . 16). The process u(t) = u(t, ω) ∈ U ⊂ Rk is our control . 1) has a unique strong solution X (u) (t); t ∈ [0, T ].

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Applied Stochastic Control of Jump Diffusions by Bernt Øksendal, Agnès Sulem

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