2023/01/06 by Yaozhong Hu, Hu, Yaozhong, Qun Shi +1
Economics, Econometrics and Finance · Mathematics · #Stochastic processes and financial applications #Differential Equations and Numerical Methods #Nonlinear Differential Equations Analysis
paper · pdf · doi:10.48550/arxiv.2301.02625
In this paper we study the existence and uniqueness of the strong solution of following d dimensional stochastic differential equation (SDE) driven by Brownian motion: dX(t)=b(t,X(t))dt+a(t,X(t))dB(t), X(0)= x, where B is a d-dimensional standard Brownian motion; the diffusion coefficient a is a Holder continuous and uniformly non-degenerate matrix-valued function and the drift coefficient b may be discontinuous and unbounded, not necessarily in Sobolev space, extending the previous works to discontinuous and unbounded drift coefficient situation. The idea is to combine the Zvonkin transformation with the Lyapunov function approach. To this end, we need to establish a local version of the connection between the solutions of the SDE up to the exit time of a bounded connected open set D and the associated partial differential equation on this domain. As an interesting byproduct, we establish a localized version of the Krylov estimates (Theorem 4.1) and a localized version of the stability result of the stochastic differential equations of discontinuous coefficients (Theorem 4.5).