Stochastic-fractional optimal control problems and application in portfolio management
Year: 2024
Type: article
Abstract: The aim of this paper is to propose a new method for solving a calss of stochasticfractional optimal control problems. To this end, we introduce an equivalent form for the presented stochastic-fractional optimal control problem and prove that these problems have the same solution. Therefore, the corresponding Hamilton– Jacobi–Bellman (HJB) equation to the equivalent stochastic-fractional optimal control problem is presented and then the Hamiltonian of the system is obtained. Finally, by considering Sharpe ratio as a performance index, Merton’s portfolio selection problem is solved by the presented stochastic-fractional optimal control method. Moreover, for indicating the advantages of the proposed method, optimal pairs trading problem is simulated.
Authors: Saba Yaghobipour, Majid Yarahmadi
Institution: Lorestan University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7125921247
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