A control problem with fuel constraint and Dawson-Watanabe superprocesses

We solve a class of control problems with fuel constraint by means of the log-Laplace transforms of $J$-functionals of Dawson-Watanabe superprocesses. This solution is related to the superprocess solution of quasilinear parabolic PDEs with singular terminal condition. For the probabilistic verification proof, we develop sharp bounds on the blow-up behavior of log-Laplace functionals of $J$-functionals, which might be of independent interest.Comment: Published in at http://dx.doi.org/10.1214/12-AAP908 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org

Robust Strategies for Optimal Order Execution in the Almgren-Chriss Framework

Assuming geometric Brownian motion as unaffected price process $S^0$, Gatheral & Schied (2011) derived a strategy for optimal order execution that reacts in a sensible manner on market changes but can still be computed in closed form. Here we will investigate the robustness of this strategy with respect to misspecification of the law of $S^0$. We prove the surprising result that the strategy remains optimal whenever $S^0$ is a square-integrable martingale. We then analyze the optimization criterion of Gatheral & Schied (2011) in the case in which $S^0$ is any square-integrable semimartingale and we give a closed-form solution to this problem. As a corollary, we find an explicit solution to the problem of minimizing the expected liquidation costs when the unaffected price process is a square-integrable semimartingale. The solutions to our problems are found by stochastically solving a finite-fuel control problem without assumptions of Markovianity

An irreversible investment model with a stochastic production capacity and fixed plus proportional adjustment costs

This paper studies the problem of a company which expands its stochastic production capacity in irreversible investments by purchasing capital and faces both fixed and proportional costs. The objective of the company is to find optimal production decisions to maximize its expected total net profit in an infinite horizon. We solve this problem explicitly by applying the theory of stochastic impulse controls.Irreversible investment; production; quasi-variational inequalities; stochastic impulse control

A wildland fire model with data assimilation

A wildfire model is formulated based on balance equations for energy and fuel, where the fuel loss due to combustion corresponds to the fuel reaction rate. The resulting coupled partial differential equations have coefficients that can be approximated from prior measurements of wildfires. An ensemble Kalman filter technique with regularization is then used to assimilate temperatures measured at selected points into running wildfire simulations. The assimilation technique is able to modify the simulations to track the measurements correctly even if the simulations were started with an erroneous ignition location that is quite far away from the correct one.Comment: 35 pages, 12 figures; minor revision January 2008. Original version available from http://www-math.cudenver.edu/ccm/report