Stochastic Optimal Control for Systems with Drifts of Bounded Variation: A Maximum Principle Approach

Antoine Marie Bogso, Rhoss Likibi Pellat, Donatien Kuissi Kamdem, Olivier Menoukeu Pamen

Published 2025-05-14Version 1

In this paper, we study the problem of stochastic optimal control for systems governed by stochastic differential equations (SDEs) with drift coefficients of bounded variation. We establish both necessary and sufficient stochastic maximum principle. To achieve this, we prove the existence and uniqueness of solutions to SDEs with random drifts of bounded variation. We then show that these solutions are Sobolev differentiable with respect to their initial conditions and provide an explicit representation involving integrals with respect to the local time of the state process. We handle the irregular drift, by constructing a sequence of approximating control problems with smooth coefficients. By applying Ekeland's variational principle, we obtain a sequence of adjoint processes, which we then use to derive the maximum principle by taking the limit.