Aug 28 – 31, 2018
Angers - France
Europe/Paris timezone

Continuous-Time Constrained Stochastic Linear-Quadratic Control with Financial Applications

Aug 29, 2018, 5:30 PM
Angers - France

Angers - France


Dr Xun LI (HK PolyU)


This work studies a class of continuous-time scalar-state stochastic Linear-Quadratic (LQ) optimal control problem with the linear control constraints. Using the state separation theorem induced from its special structure, we derive the analytical solution for this class of problem. The revealed optimal control policy is a piece-wise affine function of system state. This control policy can be computed efficiently by solving two Riccati equations off-line. Under some mild conditions, the stationary optimal control policy can be also achieved for this class of problem with infinite horizon. This result can be applied to solve the constrained dynamic mean-variance portfolio selection problem. Examples shed light on the solution procedure of implementing our method.

Primary author

Dr Xun LI (HK PolyU)


Dr James Jianhui Huang (HK PolyU) Prof. Ying HU (University of Rennes1)

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