HO6_09 - Math 236 Stochastic Differential Equations Final problem set 6 These problems are due on Friday March 20 Please put them in my mailbox

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Unformatted text preview: Math 236, Stochastic Differential Equations Final problem set 6 March 12, 2009 These problems are due on Friday March 20. Please put them in my mailbox outside the mathematics department, slip them under the door of my office or give them to me in class. Problem 1 Consider the controlled diffusion process X ( t ) that satisfies the Ito equation dX ( t ) = b ( X ( t ) ,U ( t )) dt + σ ( X ( t ) ,U ( t )) dB ( t ) with X (0) = x . Here U ( t ) ∈ U is the control process, a non-anticipating function with values in the set U . We assume that the coefficients b ( x,u ) and σ ( x,u ) satisfy the Ito conditions as functions of x , uniformly in u ∈ U . The HJB equation for the value function V ( t,x ) = inf U E t,x { g ( X ( T )) } , t ≤ T has the form V t ( t,x ) + inf u {L u V ( t,x ) } = 0 , t < T with terminal conditions V ( T,x ) = g ( x ). Here L u is the generator of the controlled diffusion L u = 1 2 σ 2 ( x,u ) ∂ 2 ∂x 2 + b ( x,u ) ∂ ∂x We assume here that the HJB equation has a classical solution and denote the unique minimal...
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This note was uploaded on 11/08/2009 for the course MATH 236 taught by Professor Papanicolaou during the Winter '08 term at Stanford.

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HO6_09 - Math 236 Stochastic Differential Equations Final problem set 6 These problems are due on Friday March 20 Please put them in my mailbox

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