Table of Links Abstract and 1. Introduction Abstract and 1. Introduction 2. Financial Market Model and Worst-Case Optimization Problem 2. Financial Market Model and Worst-Case Optimization Problem 3. Solution to the Post-Crash Problem 3. Solution to the Post-Crash Problem 4. Solution to the Pre-Crash Problem 4. Solution to the Pre-Crash Problem 5. A BSDE Characterization of Indifferences Strategies 5. A BSDE Characterization of Indifferences Strategies 6. The Markovian Case 6. The Markovian Case 7. Numerical Experiments 7. Numerical Experiments Acknowledgments and References Acknowledgments and References Appendix A. Proofs from Section 3 Appendix A. Proofs from Section 3 Appendix B. Proofs of BASDE Results from Section 5 Appendix B. Proofs of BASDE Results from Section 5 Appendix C. Proofs of (CIR) Results from Section 6 Appendix C. Proofs of (CIR) Results from Section 6 6. The Markovian Case The last proposition associates the indifference BSDE and thus ultimately the model’s unique indifference strategy and thus its worst-case optimal solution with a PDE. While instructive, Proposition 37 is usually of little practical value, because PDE (13) can in most cases only be solved numerically and then one needs an a-priori argument why a classical solution to the PDE exists and why the numerical scheme employed converges to such a classical solution. In the following we therefore consider cases, in which a version of Proposition 37 still holds true, if v is only a viscosity solution to (13) Note that in contrast to [19, 3], the driver f of our BSDE is not Lipschitz in y, but satisfies the prerequisites of Theorems 30 and 31. The following theorem ensures existence and uniqueness of solutions to the corresponding PDE in our setting (the proof can be found in Appendix C): Authors:
(1) Sascha Desmettre;
(2) Sebastian Merkel;
(3) Annalena Mickel;
(4) Alexander Steinicke. Authors: Authors: (1) Sascha Desmettre; (2) Sebastian Merkel; (3) Annalena Mickel; (4) Alexander Steinicke. This paper is available on arxiv under CC BY 4.0 DEED license. This paper is available on arxiv under CC BY 4.0 DEED license. available on arxiv

Part of HackerNoon's growing list of open-source research papers, promoting free access to academic material.

Indifference Strategies and Viscosity Solutions in Worst-Case Portfolio Optimization

About Author

Comments

TOPICS

THIS ARTICLE WAS FEATURED IN

Related Stories

5 Most Pointless Smart Life Devices to Stay Away From

Smart Trading Under Fire: Portfolio Defense Against Market Crashes

Worst-Case Portfolio Optimization & Hyperbolic Graph Clustering

LSEnet & Market Defense: Hyperbolic AI and Crash-Proof Portfolios (2026)

Optimizing Pre-Crash Portfolios: Indifference Strategies and Stochastic Market Coefficients

BSDE Characterization of Indifference Strategies for Worst-Case Portfolios

5 Most Pointless Smart Life Devices to Stay Away From

Smart Trading Under Fire: Portfolio Defense Against Market Crashes

Worst-Case Portfolio Optimization & Hyperbolic Graph Clustering

LSEnet & Market Defense: Hyperbolic AI and Crash-Proof Portfolios (2026)

Optimizing Pre-Crash Portfolios: Indifference Strategies and Stochastic Market Coefficients

BSDE Characterization of Indifference Strategies for Worst-Case Portfolios

Light-Mode

Classic

Newspaper

Minty

Dark-Mode

Neon Noir

Minty

HN StartUps