Relationship between maximum principle and dynamic programming principle for stochastic recursive optimal control problems of jump diffusions

Abstract

SUMMARYThis 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.