Maximum Principle for Forward-Backward Control System Driven by Itô-Lévy Processes under Initial-Terminal Constraints

Meijuan Liu, Xiangrong Wang and Hong Huang

Mathematical Problems in Engineering, 2017, vol. 2017, 1-13

Abstract:

This paper investigates a stochastic optimal control problem where the control system is driven by Itô-Lévy process. We prove the necessary condition about existence of optimal control for stochastic system by using traditional variational technique under the assumption that control domain is convex. We require that forward-backward stochastic differential equations (FBSDE) be fully coupled, and the control variable is allowed to enter both diffusion and jump coefficient. Moreover, we also require that the initial-terminal state be constrained. Finally, as an application to finance, we show an example of recursive consumption utility optimization problem to illustrate the practicability of our result.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:1868560

DOI: 10.1155/2017/1868560

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