Optimal control of predictive mean-field equations and applications to finance

DOI10.1007/978-3-319-23425-0_12zbMATH Open1341.49032arXiv1505.04921OpenAlexW2160824422MaRDI QIDQ2801799FDOQ2801799

Authors: Agnès Sulem, B. Øksendal 

Publication date: 22 April 2016

Published in: Stochastics of Environmental and Financial Economics (Search for Journal in Brave)

Abstract: We study a coupled system of controlled stochastic differential equations (SDEs) driven by a Brownian motion and a compensated Poisson random measure, consisting of a forward SDE in the unknown process $X(t)$ and a emph{predictive mean-field} backward SDE (BSDE) in the unknowns $Y(t),Z(t),K(t,cdot)$. The driver of the BSDE at time $t$ may depend not just upon the unknown processes $Y(t),Z(t),K(t,cdot)$, but also on the predicted future value $Y(t+delta)$, defined by the conditional expectation $A(t):=E[Y(t+delta)|mathcal{F}_t]$. \ We give a sufficient and a necessary maximum principle for the optimal control of such systems, and then we apply these results to the following two problems:\ (i) Optimal portfolio in a financial market with an emph{insider influenced asset price process.} \ (ii) Optimal consumption rate from a cash flow modeled as a geometric It^ o-L' evy SDE, with respect to emph{predictive recursive utility}.

Full work available at URL: https://arxiv.org/abs/1505.04921

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zbMATH Keywords

Brownian motionmaximum principleoptimal controlstochastic differential equationsoptimal portfoliocompensated Poisson random measureinsider influenced financial marketpredictive recurrent utilityutility maximizing consumption rate

Mathematics Subject Classification ID

Point processes (e.g., Poisson, Cox, Hawkes processes) (60G55) Portfolio theory (91G10) Brownian motion (60J65) Random measures (60G57) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Optimality conditions for problems involving randomness (49K45) Applications of stochastic analysis (to PDEs, etc.) (60H30) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Cites Work

• Infinite horizon optimal control of forward-backward stochastic differential equations with delay
• Optimal control of stochastic delay equations and time-advanced backward stochastic differential equations
• Stochastic Differential Utility
• BSDEs with jumps, optimization and applications to dynamic risk measures
• Continuous Auctions and Insider Trading

Cited In (7)

• State-space approaches for modelling and control in financial engineering. Systems theory and machine learning methods
• A probabilistic method for a class of non-Lipschitz BSDEs with application to fund management
• Stochastic control of memory mean-field processes
• An asymmetric information non-zero sum differential game of mean-field backward stochastic differential equation with applications
• Maximum principle for infinite horizon optimal control of mean-field backward stochastic systems with delay and noisy memory
• Numerical Approximation by Quantization of Control Problems in Finance Under Partial Observations
• Non-zero sum differential games of anticipated forward-backward stochastic differential delayed equations under partial information and application

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