Optimal control design for a class of quantum stochastic systems with financial applications

S. Yaghobipour and M. Yarahmadi

Physica A: Statistical Mechanics and its Applications, 2018, vol. 512, issue C, 507-522

Abstract: The purpose of this paper is to design an optimal quantum controller for a class of stochastic systems with application in financial problems. Dynamics of the system is prescribed via a Quantum Stochastic Differential System (QSDES) with a quantum Brownian motion on a quantum probability space. A theorem for guaranteeing the existence and uniqueness of solutions to the QSDES is proved. Additionally, a new optimal stochastic control problem is formulated and based on the necessary optimality conditions, an optimal quantum control law is designed, explicitly. Four theorems and two lemmas, for facilitating the optimal controller design algorithm, are proved. Finally, for demonstrating the applicable results, two financial problems, Merton portfolio allocation and optimal pairs trading problem are simulated by using the presented method. As the simulation results indicate, portfolio optimal performances, minimum risk and maximum return, are achieved via presented method.

Keywords: Quantum stochastic differential equation; Quantum Brownian motion; Quantum probability space; portfolio optimization (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:512:y:2018:i:c:p:507-522

DOI: 10.1016/j.physa.2018.08.141

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