Viscosity properties with singularities in a state-constrained expected utility maximization problem
Mathematical Finance
2015-10-14 v1
Abstract
We consider the value function originating from an expected utility maximization problem with finite fuel constraint and show its close relation to a nonlinear parabolic degenerated Hamilton-Jacobi-Bellman (HJB) equation with singularity. On one hand, we give a so-called verification argument based on the dynamic programming principle, which allows us to derive conditions under which a classical solution of the HJB equation coincides with our value function (provided that it is smooth enough). On the other hand, we establish a comparison principle, which allows us to characterize our value function as the unique viscosity solution of the HJB equation.
Cite
@article{arxiv.1510.03584,
title = {Viscosity properties with singularities in a state-constrained expected utility maximization problem},
author = {Mourad Lazgham},
journal= {arXiv preprint arXiv:1510.03584},
year = {2015}
}
Comments
23 pages, supported by Deutsche Forschungsgemeinschaft through Grant SCHI 500/3-1