A stochastic maximum principle for processes driven by fractional Brownian motion

We prove a stochastic maximum principle for controlled processes X(t)=X(u)(t) of the formdX(t)=b(t,X(t),u(t)) dt+[sigma](t,X(t),u(t)) dB(H)(t),where B(H)(t) is m-dimensional fractional Brownian motion with Hurst parameter . As an application we solve a problem about minimal variance hedging in an incomplete market driven by fractional Brownian motion.

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Authors:	Biagini, Francesca ; Hu, Yaozhong ; Øksendal, Bernt ; Sulem, Agnès
Published in:	Stochastic Processes and their Applications. - Elsevier, ISSN 0304-4149. - Vol. 100, 1-2, p. 233-253
Publisher:	Elsevier
Keywords:	Stochastic maximum principle Stochastic control Fractional Brownian motion

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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