Discrete-time stochastic recursive optimal control under constraints and application to finance.
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| Title: | Discrete-time stochastic recursive optimal control under constraints and application to finance. |
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| Authors: | Zhang, Liangquan1 (AUTHOR) xiaoquan51011@163.com, Zhang, Weihai2 (AUTHOR) |
| Source: | International Journal of Control. Nov2025, Vol. 98 Issue 11, p2749-2764. 16p. |
| Subjects: | Optimal control theory, Stochastic difference equations, Linear programming, Stochastic processes, Portfolio management (Investments), Constraint satisfaction, Financial services industry |
| Abstract: | In this paper, we establish a necessary condition for optimal control problems of discrete-time forward–backward stochastic difference equations (FBSDEs in short) with control constraints, in which the uncertainty is described by multiplicative noise. Meanwhile, a sufficient condition is given as well for the situation of unconstrained state processes. The diffusion coefficient allows to encompass the control variable under the convex control region. As an application, we focus on a linear quadratic (LQ in short) recursive utility portfolio optimisation problem in financial engineering. [ABSTRACT FROM AUTHOR] |
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| Database: | Engineering Source |
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| Abstract: | In this paper, we establish a necessary condition for optimal control problems of discrete-time forward–backward stochastic difference equations (FBSDEs in short) with control constraints, in which the uncertainty is described by multiplicative noise. Meanwhile, a sufficient condition is given as well for the situation of unconstrained state processes. The diffusion coefficient allows to encompass the control variable under the convex control region. As an application, we focus on a linear quadratic (LQ in short) recursive utility portfolio optimisation problem in financial engineering. [ABSTRACT FROM AUTHOR] |
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| ISSN: | 00207179 |
| DOI: | 10.1080/00207179.2025.2480612 |
