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Backward SDE Representation for Stochastic Control Problems with Non Dominated Controlled Intensity

Abstract : We are interested in stochastic control problems coming from mathematical finance and, in particular, related to model uncertainty, where the uncertainty affects both volatility and intensity. This kind of stochastic control problems is associated to a fully nonlinear integro-partial differential equation, which has the peculiarity that the measure $(\lambda(a,\cdot))_a$ characterizing the jump part is not fixed but depends on a parameter $a$ which lives in a compact set $A$ of some Euclidean space $\R^q$. We do not assume that the family $(\lambda(a,\cdot))_a$ is dominated. Moreover, the diffusive part can be degenerate. Our aim is to give a BSDE representation, known as nonlinear Feynman-Kac formula, for the value function associated to these control problems. For this reason, we introduce a class of backward stochastic differential equations with jumps and partially constrained diffusive part. We look for the minimal solution to this family of BSDEs, for which we prove uniqueness and existence by means of a penalization argument. We then show that the minimal solution to our BSDE provides the unique viscosity solution to our fully nonlinear integro-partial differential equation.
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https://hal.archives-ouvertes.fr/hal-00991109
Contributor : Andrea Cosso <>
Submitted on : Wednesday, May 14, 2014 - 5:11:36 PM
Last modification on : Friday, March 27, 2020 - 4:04:38 AM
Document(s) archivé(s) le : Thursday, August 14, 2014 - 12:05:33 PM

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  • HAL Id : hal-00991109, version 1
  • ARXIV : 1405.3540

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Sébastien Choukroun, Andrea Cosso. Backward SDE Representation for Stochastic Control Problems with Non Dominated Controlled Intensity. 2014. ⟨hal-00991109⟩

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