Stochastic Linear-Quadratic Optimal Control Problems with Random Coefficients and Markovian Regime Switching System

DOI10.1137/22M1481415zbMATH Open1512.49033arXiv2202.04880OpenAlexW4367307620MaRDI QIDQ6042799FDOQ6042799

Authors: Jiaqiang Wen, Xun Li, Jie Xiong, Xin Zhang 

Publication date: 4 May 2023

Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)

Abstract: This paper thoroughly investigates stochastic linear-quadratic optimal control problems with the Markovian regime switching system, where the coefficients of the state equation and the weighting matrices of the cost functional are random. We prove the solvability of the stochastic Riccati equation under the uniform convexity condition and obtain the closed-loop representation of the open-loop optimal control using the unique solvability of the corresponding stochastic Riccati equation. Moreover, by applying It^{o}'s formula with jumps, we get a representation of the cost functional on a Hilbert space, characterized as the adapted solutions of some forward-backward stochastic differential equations. We show that the necessary condition of the open-loop optimal control is the convexity of the cost functional, and the sufficient condition of the open-loop optimal control is the uniform convexity of the cost functional. In addition, we study the properties of the stochastic value flow of the stochastic linear-quadratic optimal control problem. Finally, as an application, we present a continuous-time mean-variance portfolio selection problem and prove its unique solvability.

Full work available at URL: https://arxiv.org/abs/2202.04880

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zbMATH Keywords

stochastic Riccati equationmean-variance portfolio selectionrandom coefficientstochastic linear-quadratic optimal controlMarkovian regime switching

Mathematics Subject Classification ID

Existence of optimal solutions to problems involving randomness (49J55) Linear-quadratic optimal control problems (49N10) Optimal stochastic control (93E20)

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Cited In (14)

• A note on an LQG regulator with Markovian switching and pathwise average cost
• Stochastic linear quadratic optimal control problems with random coefficients
• Stochastic Linear-Quadratic Optimal Control Problems with Random Coefficients and Markovian Regime Switching System
• Linear-quadratic optimal control under non-Markovian switching
• Time-inconsistent stochastic linear-quadratic optimal control problem under non-Markovian regime-switching jump-diffusion model
• Linear quadratic Gaussian homing for Markov processes with regime switching and applications to controlled population growth/decay
• Non-homogeneous stochastic LQ control with regime switching and random coefficients
• Open-loop and closed-loop solvabilities for stochastic linear quadratic optimal control problems of Markovian regime switching system
• The Linear Quadratic Optimization Problems for a Class of Linear Stochastic Systems With Multiplicative White Noise and Markovian Jumping
• Multidimensional indefinite stochastic Riccati equations and zero-sum stochastic linear-quadratic differential games with non-Markovian regime switching
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