Controlling a stopped diffusion process to reach a goal

Cloud Makasu

Statistics & Probability Letters, 2010, vol. 80, issue 15-16, 1218-1222

Abstract: We consider a problem of optimally controlling a two-dimensional diffusion process initially starting in the interior of a domain until it reaches the line y=[theta][phi](x) at a stopping time [tau] 0 and [theta]>1 are fixed positive constants and [phi](x) is a given positive strictly increasing, twice continuously differentiable function on (0,[infinity]) such that [phi](0)>=0. The goal is to maximize the probability criterion over a class of admissible controls consisting of bounded, Borel measurable functions. Under suitable conditions, it is shown that the maximal probability is given explicitly and the optimal process is determined explicitly by

Keywords: Geometric; Brownian; motion; Optimal; stochastic; control; problem (search for similar items in EconPapers)
Date: 2010
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