EconPapers    
Economics at your fingertips  
 

Backward SDEs for Control with Partial Information

Andrew Papanicolaou

Papers from arXiv.org

Abstract: This paper considers a non-Markov control problem arising in a financial market where asset returns depend on hidden factors. The problem is non-Markov because nonlinear filtering is required to make inference on these factors, and hence the associated dynamic program effectively takes the filtering distribution as one of its state variables. This is of significant difficulty because the filtering distribution is a stochastic probability measure of infinite dimension, and therefore the dynamic program has a state that cannot be differentiated in the traditional sense. This lack of differentiability means that the problem cannot be solved using a Hamilton-Jacobi-Bellman (HJB) equation. This paper will show how the problem can be analyzed and solved using backward stochastic differential equations (BSDEs), with a key tool being the problem's dual formulation.

Date: 2018-07
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1807.08222 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1807.08222

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2018-09-15
Handle: RePEc:arx:papers:1807.08222