A stochastic maximum principle for processes driven by fractional Brownian motion

Francesca Biagini, Yaozhong Hu, Bernt Øksendal and Agnès Sulem

Stochastic Processes and their Applications, vol. 100, issue 1-2, 233-253

Abstract: We prove a stochastic maximum principle for controlled processes X(t)=X(u)(t) of the formdX(t)=b(t,X(t),u(t)) dt+[sigma](t,X(t),u(t)) dB(H)(t),where B(H)(t) is m-dimensional fractional Brownian motion with Hurst parameter . As an application we solve a problem about minimal variance hedging in an incomplete market driven by fractional Brownian motion.

Keywords: Stochastic; maximum; principle; Stochastic; control; Fractional; Brownian; motion (search for similar items in EconPapers)
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