A Stochastic Maximum Principle for a Markov Regime-Switching Jump-Diffusion Model with Delay and an Application to Finance

Emel Savku () and Gerhard-Wilhelm Weber ()
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Emel Savku: Middle East Technical University
Gerhard-Wilhelm Weber: Middle East Technical University

Journal of Optimization Theory and Applications, 2018, vol. 179, issue 2, No 14, 696-721

Abstract: Abstract We study a stochastic optimal control problem for a delayed Markov regime-switching jump-diffusion model. We establish necessary and sufficient maximum principles under full and partial information for such a system. We prove the existence–uniqueness theorem for the adjoint equations, which are represented by an anticipated backward stochastic differential equation with jumps and regimes. We illustrate our results by a problem of optimal consumption problem from a cash flow with delay and regimes.

Keywords: Stochastic maximum principle; Regime switching; Stochastic delay equations; Anticipated backward stochastic differential equations; Jump-diffusions; Optimal consumption; 93E20; 91G80; 60J75 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s10957-017-1159-3

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