Transversality Condition in Sufficient Stochastic Maximum Principle

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Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Transversality Condition in Sufficient Stochastic Maximum Principle
Original language description
In this article, the sufficient Pontryagin's maximum principle for infinite horizon discounted stochastic control problem is given. The sufficiency is ensured by an additional assumption of concavity of the Hamiltonian function. In the paper, it is assumed that the control domain $U$ is a convex set and the control enters also the diffusion part of the state equation. Due to our setting, the Hamiltonian function has to be modified using an additional term coming from Lyapunov function for the FBSDE system. The result of this paper extends the one in cite{veverka} where the knowledge of the terminal condition of the associated BSDE is assumed. In this paper, to overcome this unrealistic assumption, we establish a so called transversality condition. Inthe end, we apply the result to an example from finance with known solution to conclude that our approach gives the same result.
Czech name
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Czech description
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Publication year
2011
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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