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arXiv · 1802.03954

On Dynamic Programming Principle for Stochastic Control under Expectation Constraints

Yuk-Loong Chow·Xiang Yu·Chao Zhou
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Abstract

This paper studies the dynamic programming principle using the measurable selection method for stochastic control of continuous processes. The novelty of this work is to incorporate intermediate expectation constraints on the canonical space at each time t. Motivated by some financial applications, we show that several types of dynamic trading constraints can be reformulated into expectation constraints on paths of controlled state processes. Our results can therefore be employed to recover the dynamic programming principle for these optimal investment problems under dynamic constraints, possibly path-dependent, in a non-Markovian framework.

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Yuk-Loong Chow, Xiang Yu, Chao Zhou. 2018-02-12. On Dynamic Programming Principle for Stochastic Control under Expectation Constraints. https://arxiv.org/abs/1802.03954

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