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

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  • Meijuan Liu
  • Xiangrong Wang
  • Hong Huang

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.

Suggested Citation

  • Meijuan Liu & Xiangrong Wang & Hong Huang, 2017. "Maximum Principle for Forward-Backward Control System Driven by Itô-Lévy Processes under Initial-Terminal Constraints," Mathematical Problems in Engineering, Hindawi, vol. 2017, pages 1-13, June.
    • Handle: RePEc:hin:jnlmpe:1868560
    DOI: 10.1155/2017/1868560
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