BSDEs with singular terminal condition and control problems with constraints

Stefan Ankirchner, Monique Jeanblanc and Thomas Kruse

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Abstract: We provide a probabilistic solution of a not necessarily Markovian control problem with a state constraint by means of a Backward Stochastic Differential Equation (BSDE). The novelty of our solution approach is that the BSDE possesses a singular terminal condition. We prove that a solution of the BSDE exists, thus partly generalizing existence results obtained by Popier in [7] and [8]. We perform a verification and discuss special cases for which the control problem has explicit solutions.

Date: 2013-05, Revised 2013-06
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Citations: View citations in EconPapers (3)

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