Articles

BSDES IN GAMES, COUPLED WITH THE VALUE FUNCTIONS. ASSOCIATED NONLOCAL BELLMAN-ISAACS EQUATIONS

  • Tao HAO ,
  • Juan LI
Expand
  • 1. School of Statistics, Shandong University of Finance and Economics, Jinan 250014, China;
    2. School of Mathematics and Statistics, Shandong University, Weihai 264209, China

Received date: 2015-05-29

  Revised date: 2016-11-24

  Online published: 2017-10-25

Supported by

The work is supported by the NSF of China (11071144, 11171187, 11222110 and 71671104), Shandong Province (BS2011SF010, JQ201202), SRF for ROCS (SEM); Program for New Century Excellent Talents in University (NCET-12-0331), 111 Project (B12023), the Ministry of Education of Humanities and Social Science Project (16YJA910003) and Incubation Group Project of Financial Statistics and Risk Management of SDUFE.

Abstract

We establish a new type of backward stochastic differential equations (BSDEs) connected with stochastic differential games (SDGs), namely, BSDEs strongly coupled with the lower and the upper value functions of SDGs, where the lower and the upper value functions are defined through this BSDE. The existence and the uniqueness theorem and comparison theorem are proved for such equations with the help of an iteration method. We also show that the lower and the upper value functions satisfy the dynamic programming principle. Moreover, we study the associated Hamilton-Jacobi-Bellman-Isaacs (HJB-Isaacs) equations, which are nonlocal, and strongly coupled with the lower and the upper value functions. Using a new method, we characterize the pair (W,U) consisting of the lower and the upper value functions as the unique viscosity solution of our nonlocal HJB-Isaacs equation. Furthermore, the game has a value under the Isaacs' condition.

Cite this article

Tao HAO , Juan LI . BSDES IN GAMES, COUPLED WITH THE VALUE FUNCTIONS. ASSOCIATED NONLOCAL BELLMAN-ISAACS EQUATIONS[J]. Acta mathematica scientia, Series B, 2017 , 37(5) : 1497 -1518 . DOI: 10.1016/S0252-9602(17)30087-5

References

[1] Andersson D, Djehiche B. A maximum principle for SDEs of mean-field type. Appl Math Optim, 2011, 63(3):341-356
[2] Bayraktar E, Poor H V. Stochastic differential games in a non-Markovian setting. SIAM J Control Optim, 2005, 43(5):1737-1756
[3] Bossy M. Some stochastic particle methods for nonlinear parabolic PDEs. ESAIM:Proc, 2005, 15:18-57
[4] Bossy M, Talay D. A stochastic particle method for the McKean-Vlasov and the Burgers equation. Math Comput, 1997, 66(217):157-192
[5] Browne S. Stochastic differential portfolio games. J Appl Probab, 2000, 37(1):126-147
[6] Buckdahn R, Cardaliaguet P, Rainer C. Nash equilibrium payoffs for nonzero-sum stochastic differential games. SIAM J Control Optim, 2004, 43(2):624-642
[7] Buckdahn R, Djehiche B, Li J. A general stochastic maximum principle for SDEs of mean-field type. Appl Math Optim, 2011, 64(2):197-216
[8] Buckdahn R, Djehiche B, Li J, Peng S. Mean-field backward stochastic differential equations:a limit approach. Ann Probab, 2009, 37(4):1524-1565
[9] Buckdahn R, Li J. Stochastic differential games and viscosity solutions of Hamilton-Jacobi-Bellman-Isaacs equations. SIAM J Control Optim, 2008, 47(1):444-475
[10] Buckdahn R, Li J, Peng S. Mean-field backward stochastic differential equations and related partial differential equations. Stoch Proc Appl, 2009, 119(10):3133-3154
[11] Chan T. Dynamics of the McKean-Vlasov equation. Ann Probab, 1994, 22(1):431-441
[12] Crandall M G, Ishii H, Lions P L. User's guide to viscosity solutions of second order partial differential equations. Bull Amer Math Soc, 1992, 27(1):1-67
[13] Fleming W H, Souganidis P E. On the existence of value functions of two-player, zero-sum stochastic differential games. Indiana Univ Math J, 1989, 38(2):293-314
[14] Hao T, Li J. Backward stochastic differential equations coupled with value function and related optimal control problems. Abstr Appl Analysis, 2014, 2014, 17 pages, article ID 262713
[15] El Karoui N, Peng S, Quenez M C. Backward stochastic differential equations in finance. Math Finance, 1997, 7(1):1-71
[16] Ikeda N, Watanabe S. Stochastic Differential Equations and Diffusion Processes. Tokyo:North HollandKodansha, 1989
[17] Karatzas I, Shreve S E. Brownian Motion and Stochastic Calculus. New York:Springer, 1987
[18] Kotelenez P. A class of quasilinear stochastic partial differential equations of McKean-Vlasov type with mass conservation. Probab Theory Rel Fields, 1995, 102(2):159-188
[19] Li J. Stochastic maximum principle in the mean-field controls. Automatica, 2012, 48(2):366-373
[20] Pardoux E. BSDEs, weak convergence and homogenization of semilinear PDEs. Nonl Analysis Diff Equ Control, 1999, 528:503-549
[21] Pardoux E, Peng S. Adapted solution of a backward stochastic differential equation. Syst Control Lett, 1990, 14(1):55-61
[22] Peng S. Probabilistic interpretation for systems of quasilinear parabolic partial differential equations. Stoch Stoch Rep, 1991, 37(1/2):61-74
[23] Peng S. Backward stochastic differential equations-stochastic optimization theory and viscosity solutions of HJB equations//Yan J A, Peng S G, Fang S Z, Wu L M. Topics on Stochastic Analysis. Beijing:Science Press, 1997:85-138(in Chinese)
[24] Pra P D, Hollander F D. McKean-Vlasov limit for interacting random processes in random media. J Stat Phys, 1996, 84(3/4):735-772
[25] Talay D, Vaillant O. A stochastic particle method with random weights for the computation of statistical solutions of McKean-Vlasov equations. Ann Appl Probab, 2003, 13(1):140-180
Outlines

/