Path-Dependent Optimal Stochastic Control and Viscosity Solution of Associated Bellman Equations

2012/10/07 by Tang, Shanjian, Zhang, Fu
#Analysis of PDEs (math.AP) #FOS: Mathematics #Optimization and Control (math.OC)

paper · doi:10.48550/arxiv.1210.2078

Abstract

In this paper we study the optimal stochastic control problem for a path-dependent stochastic system under a recursive path-dependent cost functional, whose associated Bellman equation from dynamic programming principle is a path-dependent fully nonlinear partial differential equation of second order. A novel notion of viscosity solutions is introduced. Using Dupire's functional Itô calculus, we characterize the value functional of the optimal stochastic control problem as the unique viscosity solution to the associated path-dependent Bellman equation.

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