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Maximum principle for robust utility optimization via Tsallis relative entropy

Mathematical Finance 2025-09-26 v1

Abstract

This paper investigates an optimal consumption-investment problem featuring recursive utility via Tsallis relative entropy. We establish a fundamental connection between this optimization problem and a quadratic backward stochastic differential equation (BSDE), demonstrating that the value function is the value process of the solution to this BSDE. Utilizing advanced BSDE techniques, we derive a novel stochastic maximum principle that provides necessary conditions for both the optimal consumption process and terminal wealth. Furthermore, we prove the existence of optimal strategy and analyze the coupled forward-backward system arising from the optimization problem.

Keywords

Cite

@article{arxiv.2509.20888,
  title  = {Maximum principle for robust utility optimization via Tsallis relative entropy},
  author = {Xueying Huang and Peng Luo and Dejian Tian},
  journal= {arXiv preprint arXiv:2509.20888},
  year   = {2025}
}

Comments

30 pages

R2 v1 2026-07-01T05:55:35.608Z