Maximum principle for stochastic optimal control problem of forward-backward stochastic difference systems

Shaolin Ji, Haodong Liu

Published 2018-12-29Version 1

In this paper, we study the maximum principle for stochastic optimal control problems of forward-backward stochastic difference systems (FBS{\Delta}Ss). Two types of FBS{\Delta}Ss are investigated. The first one is described by a partially coupled forward-backward stochastic difference equation (FBS{\Delta}E) and the second one is described by a fully coupled FBS{\Delta}E. By adopting an appropriate representation of the product rule and an appropriate formulation of the backward stochastic difference equation (BS{\Delta}E), we deduce the adjoint difference equation. Finally, the maximum principle for this optimal control problem with the control domain being convex is established.