On a class of path-dependent singular stochastic control problems

Romuald Elie, Ludovic Moreau and Dylan Possama\"i

Papers from arXiv.org

Abstract: This paper studies a class of non$-$Markovian singular stochastic control problems, for which we provide a novel probabilistic representation. The solution of such control problem is proved to identify with the solution of a $Z-$constrained BSDE, with dynamics associated to a non singular underlying forward process. Due to the non$-$Markovian environment, our main argumentation relies on the use of comparison arguments for path dependent PDEs. Our representation allows in particular to quantify the regularity of the solution to the singular stochastic control problem in terms of the space and time initial data. Our framework also extends to the consideration of degenerate diffusions, leading to the representation of the solution as the infimum of solutions to $Z-$constrained BSDEs. As an application, we study the utility maximisation problem with transaction costs for non$-$Markovian dynamics.

Date: 2017-01, Revised 2018-02
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1701.08861

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