Distributionally Robust Martingale Optimal Transport

Zhengqing Zhou, Jose Blanchet and Peter W. Glynn

Papers from arXiv.org

Abstract: We study the problem of bounding path-dependent expectations (within any finite time horizon $d$) over the class of discrete-time martingales whose marginal distributions lie within a prescribed tolerance of a given collection of benchmark marginal distributions. This problem is a relaxation of the martingale optimal transport (MOT) problem and is motivated by applications to super-hedging in financial markets. We show that the empirical version of our relaxed MOT problem can be approximated within $O\left( n^{-1/2}\right)$ error where $n$ is the number of samples of each of the individual marginal distributions (generated independently) and using a suitably constructed finite-dimensional linear programming problem.

Date: 2021-06, Revised 2021-11
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