Weak Dirichlet processes with a stochastic control perspective
The motivation of this paper is to prove verification theorems for stochastic optimal control of finite dimensional diffusion processes without control in the diffusion term, in the case where the value function is assumed to be continuous in time and once differentiable in the space variable (C0,1) instead of once differentiable in time and twice in space (C1,2), like in the classical results. For this purpose, the replacement tool of the Itô formula will be the Fukushima-Dirichlet decomposition for weak Dirichlet processes. Given a fixed filtration, a weak Dirichlet process is the sum of a local martingale M plus an adapted process A which is orthogonal, in the sense of covariation, to any continuous local martingale. The decomposition mentioned states that a C0,1 function of a weak Dirichlet process with finite quadratic variation is again a weak Dirichlet process. That result is established in this paper and it is applied to the strong solution of a Cauchy problem with final condition. Applications to the proof of verification theorems will be addressed in a companion paper.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 116 (2006)
Issue (Month): 11 (November)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/505572/description#description|
|Order Information:|| Postal: http://http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Russo, Francesco & Vallois, Pierre, 1995. "The generalized covariation process and Ito formula," Stochastic Processes and their Applications, Elsevier, vol. 59(1), pages 81-104, September.
- Errami, Mohammed & Russo, Francesco, 2003. "n-covariation, generalized Dirichlet processes and calculus with respect to finite cubic variation processes," Stochastic Processes and their Applications, Elsevier, vol. 104(2), pages 259-299, April.
When requesting a correction, please mention this item's handle: RePEc:eee:spapps:v:116:y:2006:i:11:p:1563-1583. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.