Stochastic representation for solutions of Isaacs’ type integral–partial differential equations

Rainer Buckdahn, Ying Hu and Juan Li

Stochastic Processes and their Applications, 2011, vol. 121, issue 12, 2715-2750

Abstract: In this paper we study the integral–partial differential equations of Isaacs’ type by zero-sum two-player stochastic differential games (SDGs) with jump-diffusion. The results of Fleming and Souganidis (1989) [9] and those of Biswas (2009) [3] are extended, we investigate a controlled stochastic system with a Brownian motion and a Poisson random measure, and with nonlinear cost functionals defined by controlled backward stochastic differential equations (BSDEs). Furthermore, unlike the two papers cited above the admissible control processes of the two players are allowed to rely on all events from the past. This quite natural generalization permits the players to consider those earlier information, and it makes more convenient to get the dynamic programming principle (DPP). However, the cost functionals are not deterministic anymore and hence also the upper and the lower value functions become a priori random fields. We use a new method to prove that, indeed, the upper and the lower value functions are deterministic. On the other hand, thanks to BSDE methods (Peng, 1997) [18] we can directly prove a DPP for the upper and the lower value functions, and also that both these functions are the unique viscosity solutions of the upper and the lower integral–partial differential equations of Hamilton–Jacobi–Bellman–Isaacs’ type, respectively. Moreover, the existence of the value of the game is got in this more general setting under Isaacs’ condition.

Keywords: Stochastic differential games; Poisson random measure; Value function; Backward stochastic differential equations; Dynamic programming principle; Integral–partial differential operators; Viscosity solution (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.spa.2011.07.011

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