Article ID: | iaor201635 |
Volume: | 37 |
Issue: | 1 |
Start Page Number: | 154 |
End Page Number: | 175 |
Publication Date: | Jan 2016 |
Journal: | Optimal Control Applications and Methods |
Authors: | Wu Zhen, Lv Siyu, Tao Ran |
Keywords: | optimization, stochastic processes, markov processes, programming: convex, investment |
This paper is concerned with a Pontryagin maximum principle for optimal control problem of stochastic system, which is described by an anticipated forward–backward stochastic differential delayed equation and modulated by a continuous‐time finite‐state Markov chain. We establish a necessary maximum principle and sufficient verification theorem for the optimal control by virtue of the duality method and convex analysis. To illustrate the theoretical results, we apply them to a recursive utility investment‐consumption problem, and the optimal consumption rate is derived explicitly.