Stochastic linear-quadratic optimal control problems with multi-dimensional state and non-Markovian regime switching

Abstract

This paper investigates the stochastic linear-quadratic (LQ, for short) optimal control problems with non-Markovian regime switching in a finite time horizon where the state equation is multi-dimensional. Similar to the classical stochastic LQ problems, we establish the relationship between the stochastic LQ optimal control problems with non-Markovian regime switching and the related extended stochastic Riccati equations. To solve the extended stochastic Riccati equations, we construct a monotone Piccard iterative sequence and present the link bewteen this sequence and solutions of a family of forward-backward stochastic differential equations. Relying on $L^p$ estimates for FBSDEs, we show that the extended stochastic Riccati equation has a solution. This partially addresses one question left in Hu et al. (Ann. Appl. Probab. 32(1): 426-460, 2022). Finally, the stochastic LQ optimal control problems with non-Markovian regime switching is solved.