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Keywords:

  • stochastic optimal control;
  • recursive utility;
  • backward stochastic differential equation;
  • jump diffusions;
  • maximum principle;
  • dynamic programming principle

SUMMARY

This paper is concerned with the relationship between maximum principle and dynamic programming principle for stochastic recursive optimal control problems of jump diffusions. Under the assumption that the value function is smooth, relations among the adjoint processes, the generalized Hamiltonian function, and the value function are given. A linear quadratic recursive utility portfolio optimization problem in the financial market is discussed to show the applications of the main result. Copyright © 2012 John Wiley & Sons, Ltd.