Applied Stochastic Control of Jump Diffusions

This book offers a rigorous introduction to the most important and useful solution methods of various types of stochastic control problems for jump diffusions and its applications. Discussion extends to both the dynamic programming method and the maximum principle method, as well as the relation between them. The authors formulate the corresponding verification theorems involving the Hamilton-Jacobi Bellman equation and/or (quasi-)variational inequalities. The text emphasises real-world applications, primarily in the field of finance. All the main results are illustrated by examples, and exercises appear at the end of each chapter with complete solutions, to help the reader understand the theory and learn how to apply it. The 2nd edition adds a new chapter on optimal control of stochastic partial differential equations driven by Levy processes, along with a new section on optimal stopping with delayed information. Some basic knowledge of stochastic analysis, measure theory and partial differential equations is assumed.