A risk-sensitive maximum principle for a Markov regime-switching jump-diffusion system and applications

Sun, Zhongyang, Kemajou-Brown, Isabelle and Menoukeu-Pamen, Olivier (2018) A risk-sensitive maximum principle for a Markov regime-switching jump-diffusion system and applications. ESAIM: Control, Optimisation and Calculus of Variations, 24 (3). pp. 985-1013.

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Official URL: http://dx.doi.org/10.1051/cocv/2017039

Abstract

<jats:p>In this paper, we derive a general stochastic maximum principle for a risk-sensitive type optimal control problem of Markov regime-switching jump-diffusion model. The results are obtained<jats:italic>via</jats:italic>a logarithmic transformation and the relationship between adjoint variables and the value function. We apply the results to study both a linear-quadratic optimal control problem and a risk-sensitive benchmarked asset management problem for Markov regime-switching models. In the latter case, the optimal control is of feedback form and is given in terms of solutions to a Markov regime-switching Riccatti equation and an ordinary Markov regime-switching differential equation.</jats:p>

Item Type:	Article
Depositing User:	Symplectic Admin
Date Deposited:	30 May 2017 07:45
Last Modified:	05 Sep 2023 00:38
DOI:	10.1051/cocv/2017039
Related URLs:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3007688