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

  title={A note on the worst case approach for a market with a stochastic interest rate.},
  author={Dariusz Zawisza},
  journal={arXiv: Mathematical Finance},
  • Dariusz Zawisza
  • Published 2020
  • Economics, Mathematics, Computer Science
  • arXiv: Mathematical Finance
We solve robust optimization problem and show the example of the 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 from the other side. PDE methods are used… Expand
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