Smooth solutions to discounted reward control problems with unbounded discount rate and financial applications
Probability
2016-02-17 v2 Optimization and Control
Mathematical Finance
Abstract
We consider a discounted reward control problem in continuous time stochastic environment where the discount rate might be an unbounded function of the control process. We provide a set of general assumptions to ensure that there exists a smooth classical solution to the corresponding HJB equation. Moreover, some verification reasoning are provided and the possible extension to dynamic games is discussed. At the end of the paper consumption - investment problems arising in financial economics are considered.
Keywords
Cite
@article{arxiv.1602.00899,
title = {Smooth solutions to discounted reward control problems with unbounded discount rate and financial applications},
author = {Dariusz Zawisza},
journal= {arXiv preprint arXiv:1602.00899},
year = {2016}
}