Optimal control problems for stochastic processes with absorbing regime

Yaacov Kopeliovich

Papers from arXiv.org

Abstract: In this paper we formulate and solve an optimal problem for Stochastic process with a regime absorbing state. The solution for this problem is obtained through a system of partial differential equations. The method is applied to obtain an explicit solution for the Merton portfolio problem when an asset has a default probability in case of a log utility.

Date: 2023-05
New Economics Papers: this item is included in nep-des and nep-upt
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Published in Journal of Stochastic Analysis vol.4 2023

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2305.01490

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