Finite-dimensional representations for controlled diffusions with delay

S. Federico , P. Tankov (1)

1 LPMA - Laboratoire de Probabilités et Modèles Aléatoires

We study stochastic delay differential equations (SDDE) where the coefficients depend on the moving averages of the state process. As a first contribution, we provide sufficient conditions under which the solution of the SDDE and a linear path functional of it admit a finite-dimensional Markovian representation. As a second contribution, we show how approximate finite-dimensional Markovian representations may be constructed when these conditions are not satisfied, and provide an estimate of the error corresponding to these approximations. These results are applied to optimal control and optimal stopping problems for stochastic systems with delay.

Domaines: Probabilités [math.PR]

S. Federico, P. Tankov. Finite-dimensional representations for controlled diffusions with delay. Applied Mathematics and Optimization, 2015, 71 (1), pp.165-194. ⟨10.1007/s00245-014-9256-2⟩. ⟨hal-01172485⟩