Some new integral inequalities of Bellman–Bihari type with delay for discontinuous functions

In this article we investigate some integral functional inequalities of Bellman–Bihari type for piecewise-continuous functions with some fixed points of discontinuity. We also prove a new analogy and generalization of results which were obtained by Bellman and Bihari to integro-sum inequalities with delay and discontinuities that do not belong to Lipschitz’s type.     

Projected equation methods for approximate solution of large linear systems

We consider linear systems of equations and solution approximations derived by projection on a low-dimensional subspace. We propose stochastic iterative algorithms, based on simulation, which converge to the approximate solution and are suitable for very large-dimensional problems. The algorithms are extensions of recent approximate dynamic programming methods, known as temporal difference methods, which solve a projected form of Bellman’s equation by using simulation-based approximations to this equation, or by using a projected value iteration method.     

Discrete dynamic programming with outcomes in random variable structures

Multiobjective approach is the common way of generalization single-criterion dynamic programming models. Another way is to consider partially ordered criteria structures. That approach is rather rare. The aim of the paper is to present such a model. Generalization of Bellman’s principle of optimality is employed to create a forward procedure to find the set of all maximal elements. As this set is usual large, the second problem under consideration is to find its subsets. To reduce the number of solutions presented to decision maker we propose to apply a family of narrowing relations. That approach is similar to scalarization in multiobjective programming. Ordered structures of random variables based on mean–variance, stochastic dominance and inverse stochastic dominance are considered. Numerical illustration is given at the end of the paper.     

A general decomposition approach for multi-criteria decision trees

In this paper, we address the dynamic and multi-criteria decision-making problems under uncertainty, generally represented by multi-criteria decision trees. Decision-making consists of choosing, at each period, a decision that maximizes the decision-maker outcomes. These outcomes should often be measured against a set of heterogeneous and conflicting criteria. Generating the set of non-dominated solutions is a common approach considered in the literature to solve the multi-criteria decision trees, but it becomes very challenging for large problems. We propose a new approach to solve multi-criteria decision trees without generating the set of all non-dominated solutions, which should reduce the computation time and the cardinality of the solution set. In particular, the proposed approach combines the advantages of decomposition with the application of multi-criteria decision aid (MCDA) methods at each decision node. A generalization of the Bellman’s principle of decomposition to the multi-criteria context is put forward. A decomposition theorem is therefore proposed. Under the sufficient conditions stated by the theorem, the principle of decomposition will generate the set of best compromise strategies. Seven MCDA methods are then characterized (lexicographic, weighted sum, multi-attribute value theory, TOPSIS, ELECTRE III, and PROMETHEE II) against the conditions of the theorem of decomposition and against other properties (neutrality, anonymous, fidelity, dominance, independency), in order to confirm or infirm their applicability with the proposed decomposition principle. Moreover, the relationship between independency and temporal consistence is discussed as well as the effects of incomparableness, rank reversals, and use of thresholds. Two conjectures resulted from this characterization.     

Interior Estimates for the First-Order Differences for Finite-Difference Approximations for Elliptic Bellman’s Equations

We establish interior estimates for the first-order finite differences of solutions of finite-difference approximations for uniformly elliptic Bellman’s equations.     

A note on the Swiss Solvency Test risk measure

In this paper we examine whether the Swiss Solvency Test risk measure is a coherent measure of risk as introduced in Artzner et al. [Artzner, P., Delbaen, F., Eber, J.M., Heath, D., 1999. Coherent measures of risk. Math. Finance 9, 203–228; Artzner, P., Delbaen, F., Eber, J.M., Heath, D., Ku, H., 2004. Coherent multiperiod risk adjusted values and Bellman’s principle. Working Paper. ETH Zurich]. We provide a simple example which shows that it does not satisfy the axiom of monotonicity. We then find, as a monotonic alternative, the greatest coherent risk measure which is majorized by the Swiss Solvency Test risk measure.     

Stochastic representation for solutions of Isaacs’ type integral–partial differential equations

In this paper we study the integral–partial differential equations of Isaacs’ type by zero-sum two-player stochastic differential games (SDGs) with jump-diffusion. The results of Fleming and Souganidis (1989) [9] and those of Biswas (2009) [3] are extended, we investigate a controlled stochastic system with a Brownian motion and a Poisson random measure, and with nonlinear cost functionals defined by controlled backward stochastic differential equations (BSDEs). Furthermore, unlike the two papers cited above the admissible control processes of the two players are allowed to rely on all events from the past. This quite natural generalization permits the players to consider those earlier information, and it makes more convenient to get the dynamic programming principle (DPP). However, the cost functionals are not deterministic anymore and hence also the upper and the lower value functions become a priori random fields. We use a new method to prove that, indeed, the upper and the lower value functions are deterministic. On the other hand, thanks to BSDE methods (Peng, 1997) [18] we can directly prove a DPP for the upper and the lower value functions, and also that both these functions are the unique viscosity solutions of the upper and the lower integral–partial differential equations of Hamilton–Jacobi–Bellman–Isaacs’ type, respectively. Moreover, the existence of the value of the game is got in this more general setting under Isaacs’ condition.     

Ekeland’s variational principle for vectorial multivalued mappings in a uniform space

In this paper, we establish Ekeland’s variational principle and an equilibrium version of Ekeland’s variational principle for vectorial multivalued mappings in the setting of separated, sequentially complete uniform spaces. Our approaches and results are different from those in Chen et al. (2008), Hamel (2005), and Lin and Chuang (2010) [13], [14] and [15]. As applications of our results, we study vectorial Caristi’s fixed point theorems and Takahashi’s nonconvex minimization theorems for multivalued mappings and their equivalent forms in a separated, sequentially complete uniform space. We also apply our results to study maximal element theorems, which are unified methods of several variational inclusion problems. Our results contain many known results in the literature Fang (1996) [21], and will have many applications in nonlinear analysis.     

Inversion of dynamic programs and its applications to allocation processes

We consider three types of discrete time deterministic dynamic programs (DP's) on one-dimensional state spaces whose reward functions depend on both state and action, namely, type I: finite-stage DP's with invertible terminal reward function, type II:finite-stage DP's without terminal reward function, and type III: infinite-stage DP's with additive reward function. Types I and II have a general objective function, which is backwards recursively generated by stage-wise reward functions. Given a (main) DP, an inverse DP yielding a new expression is defined. The inverse DP has additive expression of objective function. Deriving recursive formulae, we establish Inverse Theorems between main and inverse DP's. Each Inverse Theorem is applied to Bellman's multi-stage allocation process. Uniqueness of solution to an inverse functional equation is proved.     

Management of a pension fund under mortality and financial risks

The purpose of this article is to analyze the dividend policy and the asset allocation of a pension fund. We consider a financial market composed of three assets: cash, stocks and a rolling bond. Interest rates are driven by Vasicek’s model whereas the mortality of the insured population is modelled by a Poisson process. We determine investment and dividend policies maximizing the utility of dividends and of terminal surplus under a budget constraint. In particular, solutions are developed for CRRA and CARA utility functions. The methodology is based both on the Cox and Huang’s approach and on the dynamic programming principle.     

A maximum product criterion as a Tikhonov parameter choice rule for Kirsch’s factorization method

Kirsch’s factorization method is a fast inversion technique for visualizing the profile of a scatterer from measurements of the far-field pattern. We present a Tikhonov parameter choice approach based on a maximum product criterion (MPC) which provides a regularization parameter located in the concave part of the L-curve on a log–log scale. The performance of the method is evaluated by comparing our reconstructions with those obtained via the L-curve, Morozov’s discrepancy principle and the SVD-tail. Numerical results that illustrate the effectiveness of the MPC in reconstruction problems involving both simulated and real data are reported and analyzed.     

Some new nonlinear inequalities and applications to boundary value problems

In this paper, we establish some new nonlinear integral inequalities of the Gronwall–Bellman–Ou-Iang-type in two variables. These on the one hand generalizes and on the other hand furnish a handy tool for the study of qualitative as well as quantitative properties of solutions of differential equations. We illustrate this by applying our new results to certain boundary value problem.     

The computational content of Walras’ existence theorem

In [Y. Tanaka, Undecidability of the Uzawa equivalence theorem and LLPO, Appl. Math. Comput. 201 (2008) 378-383] Yasuhito Tanaka showed that Walras’ existence theorem implies the nonconstructive lesser limited principle of omniscience (LLPO); it follows that Walras’ existence theorem does not admit a constructive proof. We give a constructive proof of an approximate version of Walras’ existence theorem from which the full theorem can be recovered with an application of LLPO. We then push Uzawa’s equivalence theorem to the level of approximate solutions, before considering economies with at most one equilibrium.     

Hydrostatics and dynamical large deviations of boundary driven gradient symmetric exclusion processes

We prove the hydrostatics of boundary driven gradient exclusion processes, Fick’s law and we present a simple proof of the dynamical large deviations principle which holds in any dimension.     

A hidden Markov regime-switching model for option valuation

We investigate two approaches, namely, the Esscher transform and the extended Girsanov’s principle, for option valuation in a discrete-time hidden Markov regime-switching Gaussian model. The model’s parameters including the interest rate, the appreciation rate and the volatility of a risky asset are governed by a discrete-time, finite-state, hidden Markov chain whose states represent the hidden states of an economy. We give a recursive filter for the hidden Markov chain and estimates of model parameters using a filter-based EM algorithm. We also derive predictors for the hidden Markov chain and some related quantities. These quantities are used to estimate the price of a standard European call option. Numerical examples based on real financial data are provided to illustrate the implementation of the proposed method.     

Optimal insurance in the presence of insurer’s loss limit

In this paper we consider the optimal insurance problem when the insurer has a loss limit constraint. Under the assumptions that the insurance price depends only on the policy’s actuarial value, and the insured seeks to maximize the expected utility of his terminal wealth, we show that coverage above a deductible up to a cap is the optimal contract, and the relaxation of insurer’s loss limit will increase the insured’s expected utility.When the insurance price is given by the expected value principle, we show that a positive loading factor is a sufficient and necessary condition for the deductible to be positive. Moreover, with the expected value principle, we show that the optimal deductible derived in our model is not greater (lower) than that derived in Arrow’s model if the insured’s preference displays increasing (decreasing) absolute risk aversion. Therefore, when the insured has an IARA (DARA) utility function, compared to Arrow model, the insurance policy derived in our model provides more (less) coverage for small losses, and less coverage for large losses.Furthermore, we prove that the optimal insurance derived in our model is an inferior (normal) good for the insured with a DARA (IARA) utility function, consistent with the finding in the previous literature. Being inferior, the insurance can also be a Giffen good. Under the assumption that the insured’s initial wealth is greater than a certain level, we show that the insurance is not a Giffen good if the coefficient of the insured’s relative risk aversion is lower than 1.     

On the relation between the weak Palais–Smale condition and coercivity given by Zhong

In this paper, we discuss Zhong’s result that the weak Palais–Smale condition implies coercivity under some assumption given in [C.-K. Zhong, A generalization of Ekeland’s variational principle and application to the study of the relation between the weak P.S. condition and coercivity, Nonlinear Anal. 29 (1997) 1421–1431]. We also give a simple proof of Zhong’s result. Further we generalize the result of Caklovic, Li and Willem [L. Caklovic, S.J. Li, M. Willem, A note on Palais–Smale condition and coercivity, Differential Integral Equations 3 (1990) 799–800].     

Transitivity and variational principles

We apply an order reasoning to mappings satisfying the triangle inequality. This general approach yields the Ekeland’s variational principle as one of the consequences. In addition we obtain an extension of the Brøndsted variational principle and of the Takahashi fixed point theorem.     

Pontryagin’s maximum principle for constrained impulsive control problems

Necessary conditions in the form of Pontryagin’s maximum principle are derived for impulsive control problems with mixed constraints. A new mathematical concept of impulsive control is introduced as a requirement for the consistency of the impulsive framework. Additionally, this control concept enables the incorporation of the engineering needs to consider conventional control action while the impulse develops. The regularity assumptions under which the maximum principle is proved are weaker than those in the known literature. Ekeland’s variational principle and Lebesgue’s discontinuous time variable change are used in the proof. The article also contains an example showing how such impulsive controls could be relevant in actual applications.     

Robust Optimal Stopping-Time Control for Nonlinear Systems

Abstract. We formulate a robust optimal stopping-time problem for a state-space system and give the connection between various notions of lower value function for the associated games (and storage function for the associated dissipative system) with solutions of the appropriate variational inequality (VI) (the analogue of the Hamilton—Jacobi—Bellman—Isaacs equation for this setting). We show that the stopping-time rule can be obtained by solving the VI in the viscosity sense and a positive definite supersolution of the VI can be used for stability analysis.