ROBUST UTILITY MAXIMIZATION WITH LÉVY PROCESSES

Ariel Neufeld and Marcel Nutz

Mathematical Finance, 2018, vol. 28, issue 1, 82-105

Abstract: We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible Lévy triplets, that is, possible instantaneous drift, volatility, and jump characteristics of the price process. We show that an optimal investment strategy exists and compute it in semi†closed form. Moreover, we provide a saddle point analysis describing a worst†case model.

Date: 2018
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