A Maximum Principle for Stochastic Control with Partial Information

We study the problem of optimal control of a jump diffusion, that is, a process which is the solution of a stochastic differential equation driven by Lévy processes. It is required that the control process is adapted to a given subfiltration of the filtration generated by the underlying Lévy process...

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Bibliographic Details
Published inStochastic analysis and applications Vol. 25; no. 3; pp. 705 - 717
Main Authors Baghery, Fouzia, Øksendal, Bernt
Format Journal Article
LanguageEnglish
Published Philadelphia, PA Taylor & Francis Group 02.05.2007
Taylor & Francis
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Summary:We study the problem of optimal control of a jump diffusion, that is, a process which is the solution of a stochastic differential equation driven by Lévy processes. It is required that the control process is adapted to a given subfiltration of the filtration generated by the underlying Lévy processes. We prove two maximum principles (one sufficient and one necessary) for this type of partial information control. The results are applied to a partial information mean-variance portfolio selection problem in finance.
ISSN:0736-2994
1532-9356
DOI:10.1080/07362990701283128