Assessing non-convex value functions for the optimal control of stochastic differential equations

Solving the optimal control of stochastic differential equations (SDEs) using the dynamic programming method requires writing the problem in terms of the so-called value function. This paper presents conditions to assure that the value function is convex away from the origin, a concept that allows the value function be non-convex in a region close to the origin. In contrast, for regions away from the origin, the value function remains convex under some mild conditions. Stochastic ordering is used to prove this result. A numerical example illustrates the potential benefits of our approach.