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.
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