Stochastic Target Games and Dynamic Programming via Regularized Viscosity Solutions

• 成果类型: Article
• 署名作者: Bouchard, Bruno; Nutz, Marcel
• 署名单位: Universite PSL; Universite Paris-Dauphine; Institut Polytechnique de Paris; ENSAE Paris; Columbia University; Columbia University
• 刊物名称: MATHEMATICS OF OPERATIONS RESEARCH
• ISSN/ISSBN: 0364-765X
• DOI: 10.1287/moor.2015.0718
• 发表日期: 2016
• 页码: 109-124
• 关键词: partial-differential-equations; CONVERGENCE; formulation

摘要

We study a class of stochastic target games where one player tries to find a strategy such that the state process almost surely reaches a given target, no matter which action is chosen by the opponent. Our main result is a geometric dynamic programming principle, which allows us to characterize the value function as the viscosity solution of a nonlinear partial differential equation. Because abstract measurable selection arguments cannot be used in this context, the main obstacle is the construction of measurable almost optimal strategies. We propose a novel approach where smooth supersolutions are used to define almost-optimal strategies of Markovian type, similarly as in verification arguments for classical solutions of Hamilton-Jacobi-Bellman equations. The smooth supersolutions are constructed by an extension of Krylov's method of shaken coefficients. We apply our results to a problem of option pricing under model uncertainty with different interest rates for borrowing and lending.