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Applied Mathematics and Optimization, Vol.64, No.2, 155-169, 2011
Sufficient Stochastic Maximum Principle in a Regime-Switching Diffusion Model
We prove a sufficient stochastic maximum principle for the optimal control of a regime-switching diffusion model. We show the connection to dynamic programming and we apply the result to a quadratic loss minimization problem, which can be used to solve a mean-variance portfolio selection problem.
Keywords:Sufficient maximum principle;Regime-switching;Optimal control;Mean-variance portfolio selection