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Chinese Annals of Mathematics, Series B

, Volume 39, Issue 5, pp 773–790 | Cite as

Stochastic Maximum Principle for Forward-Backward Regime Switching Jump Diffusion Systems and Applications to Finance

  • Siyu Lv
  • Zhen Wu
Article
  • 9 Downloads

Abstract

The authors prove a sufficient stochastic maximum principle for the optimal control of a forward-backward Markov regime switching jump diffusion system and show its connection to dynamic programming principle. The result is applied to a cash flow valuation problem with terminal wealth constraint in a financial market. An explicit optimal strategy is obtained in this example.

Keywords

Stochastic maximum principle Dynamic programming principle Forward-backward stochastic differential equation Regime switching Jump diffusion 

2000 MR Subject Classification

93E20 60H10 91B26 

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Notes

Acknowledgement

The authors would like to thank the anonymous referee for valuable comments, which led to a much better version of this paper.

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Copyright information

© Fudan University and Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of MathematicsSoutheast UniversityNanjingChina
  2. 2.School of MathematicsShandong UniversityJinanChina

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