Finite-dimensional representations for controlled diffusions with delay

Salvatore Federico; Peter Tankov

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arXiv · 1310.4299

Finite-dimensional representations for controlled diffusions with delay

Salvatore Federico·Peter Tankov

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Abstract

We study stochastic delay differential equations (SDDE) where the coefficients depend on the moving averages of the state process. As a first contribution, we provide sufficient conditions under which a linear path functional of the solution of a SDDE admits a finite-dimensional Markovian representation. As a second contribution, we show how approximate finite-dimensional Markovian representations may be constructed when these conditions are not satisfied, and provide an estimate of the error corresponding to these approximations. These results are applied to optimal control and optimal stopping problems for stochastic systems with delay.

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Salvatore Federico, Peter Tankov. 2013-10-16. Finite-dimensional representations for controlled diffusions with delay. https://arxiv.org/abs/1310.4299

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