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arXiv · 2305.01490

Optimal control problems for stochastic processes with absorbing regime

yaacov Kopeliovich
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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.

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yaacov Kopeliovich. 2023-05-02. Optimal control problems for stochastic processes with absorbing regime. https://doi.org/10.31390/josa.4.1.06

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