Communications in Information and Systems

Volume 6 (2006)

Number 4

A maximum principle for stochastic optimal control with terminal state constraints, and its applications

Pages: 321 – 338

DOI: http://dx.doi.org/10.4310/CIS.2006.v6.n4.a4

Authors

Shaolin Ji

Xun Yu Zhou

Abstract

This paper is concerned with a stochastic optimal control problem where the controlled system is described by a forward-backward stochastic differential equation (FBSDE), while the forward state is constrained in a convex set at the terminal time. An equivalent backward control problem is introduced. By using Ekeland's variational principle, a stochastic maximum principle is obtained. Applications to state constrained stochastic linear-quadratic control models and a recursive utility optimization problem are investigated.

Keywords

Forward-backward stochastic differential equation (FBSDE); state constraints; Ekeland's variational principle; maximum principle; recursive utility; linear-quadratic control

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