Time-Inconsistent Stochastic Linear--Quadratic Control

• Published in: SIAM journal on control and optimization Vol. 50; no. 3; pp. 1548 - 1572
• Main Authors: Hu, Ying, Jin, Hanqing, Zhou, Xun Yu
• Format: Journal Article
• Language: English
• Published: Philadelphia Society for Industrial and Applied Mathematics 01.01.2012
• Subjects: Applied mathematics; Dynamical Systems; Equilibrium; Mathematics; Optimization and Control; Portfolio Management; Probability; Quantitative Finance; Random variables; Stochastic control theory; time-inconsistency; forward-backward stochastic differential equation; mean-variance portfolio selection; stochastic linear-quadratic control; equilibriumcontrol

In this paper, we formulate a general time-inconsistent stochastic linear--quadratic (LQ) control problem. The time-inconsistency arises from the presence of a quadratic term of the expected state as well as a state-dependent term in the objective functional. We define an equilibrium, instead of opt...