SIAM Journal on Control and Optimization, Vol.50, No.2, 964-990, 2012
A STOCHASTIC MAXIMUM PRINCIPLE FOR A MARKOV REGIME-SWITCHING JUMP-DIFFUSION MODEL AND ITS APPLICATION TO FINANCE
This paper develops a sufficient stochastic maximum principle for a stochastic optimal control problem, where the state process is governed by a continuous-time Markov regime-switching jump-diffusion model. We also establish the relationship between the stochastic maximum principle and the dynamic programming principle in a Markovian case. Applications of the stochastic maximum principle to the mean-variance portfolio selection problem are discussed.
Keywords:stochastic maximum principle;regime switching;jump-diffusion;dynamic programming;mean-variance portfolio selection