IMMUNIZATION AND MAX-MIN OPTIMAL-CONTROL

A model of a term structure of interest rates is conceived in which di sturbances are unknown and bounded. Arbitrage opportunities are ruled out by imposing suitable constraints to the disturbances. This sets th e stage for casting a well-known immunization problem as a max-min opt imal control problem. Dynamic programming is then used to obtain the a nalytical solution to such a problem. In this manner, a well-known imm unization policy is proved to be optimal in a dynamic setting.