We study the dependence of mild solutions to linear stochastic evolution equations on Hilbert space driven by Wiener noise, with drift having linear part of the type A+εG, on the parameter ε. In particular, we study the limit and the asymptotic expansions in powers of ε of these solutions, as well as of functionals thereof, as ε→0, with good control on the remainder. These convergence and series expansion results are then applied to a parabolic perturbation of the Musiela SPDE of mathematical finance modeling the dynamics of forward rates.
Singular perturbations and asymptotic expansions for SPDEs with an application to term structure models
Albeverio, Sergio;Mastrogiacomo, Elisa
2023-01-01
Abstract
We study the dependence of mild solutions to linear stochastic evolution equations on Hilbert space driven by Wiener noise, with drift having linear part of the type A+εG, on the parameter ε. In particular, we study the limit and the asymptotic expansions in powers of ε of these solutions, as well as of functionals thereof, as ε→0, with good control on the remainder. These convergence and series expansion results are then applied to a parabolic perturbation of the Musiela SPDE of mathematical finance modeling the dynamics of forward rates.File | Dimensione | Formato | |
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