A note on the worst case approach for a market with a stochastic interest rate

doi:10.4064/am2348-2-2018

A note on the worst case approach for a market with a stochastic interest rate

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A note on the worst case approach for a market with a stochastic interest rate

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punktacja MEiN [2018 B]: 14

title:	A note on the worst case approach for a market with a stochastic interest rate
author:	Zawisza Dariusz
journal title:	Applicationes Mathematicae
volume:	45
issue:	2
date of publication :	2018
pages:	151-160
ISSN:	1233-7234
eISSN:	1730-6280
DOI:	10.4064/am2348-2-2018
language:	English
journal language:	English
abstract in English:	We solve a robust optimization problem and show an example of a market model for which the worst case measure is not a martingale measure. In our model the instantaneous interest rate is determined by the Hull-White model and the investor employs the HARA utility to measure his satisfaction. To protect against the model uncertainty he uses the worst case measure approach. The problem is formulated as a stochastic game between the investor and the market. PDE methods are used to find a saddle point and a precise verification argument is provided.
affiliation:	Wydział Matematyki i Informatyki : Instytut Matematyki
type:	journal article
subtype:	academic paper

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