*Gopinath Kallianpur and P. Sundar*

- Published in print:
- 2014
- Published Online:
- April 2014
- ISBN:
- 9780199657063
- eISBN:
- 9780191781759
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199657063.003.0008
- Subject:
- Mathematics, Probability / Statistics, Applied Mathematics

The connection between stochastic differential equations and partial differential equations is discussed in this chapter. The Dirichlet problem is studied and several examples are presented. Next, ...
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The connection between stochastic differential equations and partial differential equations is discussed in this chapter. The Dirichlet problem is studied and several examples are presented. Next, the heat equation, and the Feynman-Kac formula are discussed. The Kolmogorov forward and backward equations are derived after proving the smoothness of solutions in the mean square sense. Applications to pricing of derivatives in finance theory are given.Less

The connection between stochastic differential equations and partial differential equations is discussed in this chapter. The Dirichlet problem is studied and several examples are presented. Next, the heat equation, and the Feynman-Kac formula are discussed. The Kolmogorov forward and backward equations are derived after proving the smoothness of solutions in the mean square sense. Applications to pricing of derivatives in finance theory are given.

*Charles L. Epstein and Rafe Mazzeo*

- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691157122
- eISBN:
- 9781400846108
- Item type:
- book

- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691157122.001.0001
- Subject:
- Mathematics, Probability / Statistics

This book provides the mathematical foundations for the analysis of a class of degenerate elliptic operators defined on manifolds with corners, which arise in a variety of applications such as ...
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This book provides the mathematical foundations for the analysis of a class of degenerate elliptic operators defined on manifolds with corners, which arise in a variety of applications such as population genetics, mathematical finance, and economics. The results discussed in this book prove the uniqueness of the solution to the martingale problem and therefore the existence of the associated Markov process. The book uses an “integral kernel method” to develop mathematical foundations for the study of such degenerate elliptic operators and the stochastic processes they define. The precise nature of the degeneracies of the principal symbol for these operators leads to solutions of the parabolic and elliptic problems that display novel regularity properties. Dually, the adjoint operator allows for rather dramatic singularities, such as measures supported on high codimensional strata of the boundary. The book establishes the uniqueness, existence, and sharp regularity properties for solutions to the homogeneous and inhomogeneous heat equations, as well as a complete analysis of the resolvent operator acting on Hölder spaces. It shows that the semigroups defined by these operators have holomorphic extensions to the right half plane. The book also demonstrates precise asymptotic results for the long-time behavior of solutions to both the forward and backward Kolmogorov equations.Less

This book provides the mathematical foundations for the analysis of a class of degenerate elliptic operators defined on manifolds with corners, which arise in a variety of applications such as population genetics, mathematical finance, and economics. The results discussed in this book prove the uniqueness of the solution to the martingale problem and therefore the existence of the associated Markov process. The book uses an “integral kernel method” to develop mathematical foundations for the study of such degenerate elliptic operators and the stochastic processes they define. The precise nature of the degeneracies of the principal symbol for these operators leads to solutions of the parabolic and elliptic problems that display novel regularity properties. Dually, the adjoint operator allows for rather dramatic singularities, such as measures supported on high codimensional strata of the boundary. The book establishes the uniqueness, existence, and sharp regularity properties for solutions to the homogeneous and inhomogeneous heat equations, as well as a complete analysis of the resolvent operator acting on Hölder spaces. It shows that the semigroups defined by these operators have holomorphic extensions to the right half plane. The book also demonstrates precise asymptotic results for the long-time behavior of solutions to both the forward and backward Kolmogorov equations.