Controlled reflected SDEs and Neumann problem for backward SPDEs

Abstract

We solve the optimal control problem of a one-dimensional reflected stochastic differential equation, whose coefficients can be path dependent. The value function of this problem is characterized by a backward stochastic partial differential equation (BSPDE) with Neumann boundary conditions. We prove the existence and uniqueness of a sufficiently regular solution for this BSPDE, which is then used to construct the optimal feedback control. In fact, we prove a more general result: the existence and uniqueness of strong solution for the Neumann problem for general nonlinear BSPDEs, which might be of interest even out of the current context.