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Sufficient Stochastic Maximum Principle in a Regime-Switching Diffusion Model

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Abstract

We prove a sufficient stochastic maximum principle for the optimal control of a regime-switching diffusion model. We show the connection to dynamic programming and we apply the result to a quadratic loss minimization problem, which can be used to solve a mean-variance portfolio selection problem.

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Authors and Affiliations

  1. Department of Actuarial Mathematics and Statistics, Heriot-Watt University, Edinburgh, UK

    Catherine Donnelly

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  1. Catherine Donnelly
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Correspondence to Catherine Donnelly.

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Donnelly, C. Sufficient Stochastic Maximum Principle in a Regime-Switching Diffusion Model. Appl Math Optim 64, 155–169 (2011). https://doi.org/10.1007/s00245-010-9130-9

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  • DOI: https://doi.org/10.1007/s00245-010-9130-9

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