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arXiv · 2302.08809

Optimal control of stochastic delay differential equations and applications to path-dependent financial and economic models

Filippo de Feo·Salvatore Federico·Andrzej Święch
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Abstract

In this manuscript we consider a class optimal control problem for stochastic differential delay equations. First, we rewrite the problem in a suitable infinite-dimensional Hilbert space. Then, using the dynamic programming approach, we characterize the value function of the problem as the unique viscosity solution of the associated infinite-dimensional Hamilton-Jacobi-Bellman equation. Finally, we prove a $C^{1,\alpha}$-partial regularity of the value function. We apply these results to path dependent financial and economic problems (Merton-like portfolio problem and optimal advertising).

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Filippo de Feo, Salvatore Federico, Andrzej Święch. 2023-02-17. Optimal control of stochastic delay differential equations and applications to path-dependent financial and economic models. https://arxiv.org/abs/2302.08809

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