Applied Mathematics and Optimization, Vol.81, No.3, 739-756, 2020
Feedback Optimal Controllers for the Heston Model
We prove the existence of an optimal feedback controller for a stochastic optimization problem constituted by a variation of the Heston model, where a stochastic input process is added in order to minimize a given performance criterion. The stochastic feedback controller is found by solving a nonlinear backward parabolic equation for which one proves the existence and uniqueness of a martingale solution.
Keywords:Heston model;Stochastic control;Feedback controller;Hamilton-Jacobi equations;Nonlinear parabolic equations