Variational Inequalities on Unbounded Domains for Zero-Sum Singular Controller vs. Stopper Games

Abstract

We study a class of zero-sum games between a singular controller and a stopper over a finite-time horizon. The underlying process is a multidimensional (locally nondegenerate) controlled stochastic differential equation (SDE) evolving in an unbounded domain. We prove that such games admit a value and provide an optimal strategy for the stopper. The value of the game is shown to be the maximal solution in a suitable Sobolev class of a variational inequality of min-max type with an obstacle constraint and a gradient constraint. Although the variational inequality and the game are solved on an unbounded domain, we do not require boundedness of either the coefficients of the controlled SDE or of the cost functions in the game. Funding: A. Bovo was partially supported by the Doctoral Studentship from the University of Leeds.