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arXiv · 2206.13267

A Stochastic Target Problem for Branching Diffusions

Idris Kharroubi·Antonio Ocello
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Abstract

We consider an optimal stochastic target problem for branching diffusion processes. This problem consists in finding the minimal condition for which a control allows the underlying branching process to reach a target set at a finite terminal time for each of its branches. This problem is motivated by an example from fintech where we look for the super-replication price of options on blockchain based cryptocurrencies. We first state a dynamic programming principle for the value function of the stochastic target problem. We then show that the value function can be reduced to a new function with a finite dimensional argument by a so called branching property. Under wide conditions, this last function is shown to be the unique viscosity solution to an HJB variational inequality.

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Idris Kharroubi, Antonio Ocello. 2022-06-27. A Stochastic Target Problem for Branching Diffusions. https://arxiv.org/abs/2206.13267

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