Deshpande , Amogh (2014) Sufficient stochastic maximum principle for the optimal control of semi-Markov modulated jump-diffusion with application to financial optimization. Stochastic Analysis and Applications, Volume 32 (Number 6). pp. 911-933. doi:10.1080/07362994.2014.945038 ISSN 1532-9356.

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Abstract

The finite state semi-Markov process is a generalization over the Markov chain in which the sojourn time distribution is any general distribution. In this article we provide a sufficient stochastic maximum principle for the optimal control of a semi-Markov modulated jump-diffusion process in which the drift, diffusion and the jump kernel of the jump-diffusion process is modulated by a semi-Markov process. We also connect the sufficient stochastic maximum principle with the dynamic programming equation. We apply our results to finite horizon risk-sensitive control portfolio optimization problem and to a quadratic loss minimization problem.

Item Type:	Journal Article
Subjects:	Q Science > QA Mathematics
Divisions:	Faculty of Science, Engineering and Medicine > Science > Statistics
Library of Congress Subject Headings (LCSH):	Markov processes
Journal or Publication Title:	Stochastic Analysis and Applications
Publisher:	Taylor & Francis Inc.
ISSN:	1532-9356
Official Date:	21 October 2014
Dates:	Date Event 21 October 2014 Published 11 July 2014 Accepted 16 February 2014 Submitted
Volume:	Volume 32
Number:	Number 6
Page Range:	pp. 911-933
DOI:	10.1080/07362994.2014.945038
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Date of first compliant deposit:	27 December 2015
Date of first compliant Open Access:	27 December 2015

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