Work

The relationship between maximum principle and dynamic programming principle for stochastic recursive control problem with random coefficients

Year: 2024

Type: article

Abstract: This paper aims to explore the relationship between maximum principle and dynamic programming principle for stochastic recursive control problem with random coefficients. Under certain regular conditions for the coefficients, the relationship between the Hamiltonian system with random coefficients and stochastic Hamilton–Jacobi–Bellman equation is obtained. It is very different from the deterministic coefficients case since stochastic Hamilton–Jacobi–Bellman equation is a backward stochastic partial differential equation with solution being a pair of random fields rather than a deterministic function. A linear quadratic recursive optimization problem is given as an explicitly illustrated example based on this kind of relationship.

Source: Springer Link (Chiba Institute of Technology)

DOI: 10.1051/cocv/2024078/pdf

Authors: Yuchao Dong, Qingxin Meng, Qi Zhang

Institutions: Tongji University, Huzhou Normal University, Fudan University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: National Natural Science Foundation of China, Science and Technology Commission of Shanghai Municipality, Natural Science Foundation of Zhejiang Province