BSDEs driven by time-changed Lévy noises and optimal control

Giulia Di Nunno, Steffen Sjursen

Published 2013-12-18Version 1

We study backward stochastic differential equations (BSDEs) for time-changed L\'evy noises when the time-change is independent of the L\'evy process. We prove existence and uniqueness of the solution and we obtain an explicit formula for linear BSDEs and a comparison principle. BSDEs naturally appear in control problems. Here we prove a sufficient maximum principle for a general optimal control problem of a system driven by a time-changed L\'evy noise. As an illustration we solve the mean-variance portfolio selection problem.