A maximum principle for Markov regime-switching forward-backward stochastic differential games and applications
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Publication:2407985
stochastic differential gamesstochastic maximum principleMarkov regime-switchingoptimal investmentforward-backward stochastic differential equations
Processes with independent increments; Lévy processes (60G51) Portfolio theory (91G10) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Optimality conditions for problems involving randomness (49K45) Financial applications of other theories (91G80) Optimal stochastic control (93E20)
Abstract: In this paper, we present an optimal control problem for stochastic differential games under Markov regime-switching forward-backward stochastic differential equations with jumps and partial information. First, we prove a sufficient maximum principle for non zero-sum stochastic differential game problems and obtain equilibrium point for such games. Second, we prove an equivalent maximum principle for non zero-sum stochastic differential games. The zero-sum stochastic differential games equivalent maximum principle is then obtained as a corollary. We apply the obtained results to study a problem of robust utility maximization under penalty entropy. We also apply the result to find optimal investment of an insurance firm under model uncertainty.
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Cited in
(10)- Risk-based optimal portfolio of an insurance firm with regime switching and noisy memory
- Stochastic differential games for optimal investment problems in a Markov regime-switching jump-diffusion market
- Optimal stochastic investment games under Markov regime switching market
- Stochastic differential games with controlled regime-switching
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- A risk-sensitive maximum principle for a Markov regime-switching jump-diffusion system and applications
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