Risk-sensitive exit-time control for stochastic differential equations with path-dependent coefficients

2026/07/20 by David Criens, Fabian Fuchs
Mathematics · #math.OC #math.PR

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Abstract

In this work, we study small-noise asymptotics of risk-sensitive exit-time control problems governed by stochastic differential equations with path-dependent coefficients. Our main result establishes the convergence of the log-transformed exit-time problem to a deterministic control problem with path-dependent coefficients. For its proof, we first derive a novel variational representation for general log-transformed stochastic control problems with path-dependent coefficients, combining tools from the theory of path-dependent partial differential equations and convex expectations on path spaces. In a second step, we use probabilistic methods to analyze the convergence of the resulting variational formulas. To illustrate the scope of our analysis, we consider a computable example for a stochastic differential equation with memory and characterize the limiting problem and associated control strategies.

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