Controlled Reflected SDEs and Neumann Problem for Backward SPDEs
Abstract
We solve the optimal control problem of a one-dimensional reflected stochastic differential equation, whose coefficients can be path dependent. The value function of this problem is characterized by a backward stochastic partial differential equation (BSPDE) with Neumann boundary conditions. We prove the existence and uniqueness of sufficiently regular solution for this BSPDE, which is then used to construct the optimal feedback control. In fact we prove a more general result: The existence and uniqueness of strong solution for the Neumann problem for general nonlinear BSPDEs, which might be of interest even out of the current context.
Keywords
Cite
@article{arxiv.1706.06284,
title = {Controlled Reflected SDEs and Neumann Problem for Backward SPDEs},
author = {Erhan Bayraktar and Jinniao Qiu},
journal= {arXiv preprint arXiv:1706.06284},
year = {2019}
}
Comments
Final version. To appear in the Annals of Applied Probability. Keywords: optimal control of reflected stochastic differential equations, Neumann problem, backward stochastic partial differential equation