The Maximum Principle in Time-Inconsistent LQ Optimal Control Problem for Jump Diffusions
Abstract
In this paper, we consider a general time-inconsistent optimal control problem for a non homogeneous linear system, in which its state evolves according to a stochastic differential equation with deterministic coefficients, when the noise is driven by a Brownian motion and an independent Poisson point process. The running and the terminal costs in the objective functional, are explicitly dependent on some general discounting coefficients which cover the non-exponential and the hyperbolic discounting situations. Furthermore, the presence of some quadratic terms of the conditional expectation of the state process as well as a state-dependent term in the objective functional makes the problem time-inconsistent. Open-loop Nash equilibrium controls are constructed instead of optimal controls, by using a version of the stochastic maximum principle approach. This approach involves a stochastic system that consists of a flow of forward-backward stochastic differential equations and an equilibrium condition. As an application, we study some concrete examples.
Cite
@article{arxiv.1505.04674,
title = {The Maximum Principle in Time-Inconsistent LQ Optimal Control Problem for Jump Diffusions},
author = {Ishak Alia and Farid Chighoub and Ayesha Sohail},
journal= {arXiv preprint arXiv:1505.04674},
year = {2015}
}
Comments
arXiv admin note: text overlap with arXiv:1111.0818 by other authors