Approximation, Comparison, and Optimization of Stochastic Processes
Stochastic processes form a key methodology for analyzing random
interactions in today's financial and information systems. This project
incorporates the fields of stochastic analysis, stochastic comparison,
and convex analysis in order to develop new mathematical methods for
understanding, computing, and optimizing stochastic processes related
to discontinuous and nonlinear models in finance and engineering.
Expected theoretical contributions of the project include approximation
formulas for complex functionals of Lévy processes, new comparison
techniques for stochastic processes using binary relations, algorithms
for finding sharp reversible bounds for Markov processes, and new
existence and uniqueness criteria for general stochastic optimization
problems. Expected contributions to applied sciences include
quantitative methods for pricing of financial instruments in illiquid
markets, criteria for the existence of arbitrage in financial markets
with small transaction costs, and nearly optimal control of data
networks.
- Funding: Academy of Finland, 2009-2012
- Researcher in charge: E. Valkeila
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