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Maximum Principle for Optimal Control Problems of Forward-Backward Regime-Switching Systems Involving Impulse Controls

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  • Shujun Wang
  • Zhen Wu

Abstract

This paper is concerned with optimal control problems of forward-backward Markovian regime-switching systems involving impulse controls. Here the Markov chains are continuous-time and finite-state. We derive the stochastic maximum principle for this kind of systems. Besides the Markov chains, the most distinguishing features of our problem are that the control variables consist of regular and impulsive controls, and that the domain of regular control is not necessarily convex. We obtain the necessary and sufficient conditions for optimal controls. Thereafter, we apply the theoretical results to a financial problem and get the optimal consumption strategies.

Suggested Citation

  • Shujun Wang & Zhen Wu, 2015. "Maximum Principle for Optimal Control Problems of Forward-Backward Regime-Switching Systems Involving Impulse Controls," Mathematical Problems in Engineering, Hindawi, vol. 2015, pages 1-13, March.
    • Handle: RePEc:hin:jnlmpe:892304
    DOI: 10.1155/2015/892304
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