Optimal consumption strategies under model uncertainty

Burgert Christian and Rüschendorf Ludger

Statistics & Risk Modeling, 2005, vol. 23, issue 1, 1-14

Abstract: In this paper we consider the problem of finding optimal consumption strategies in an incomplete semimartingale market model under model uncertainty. The quality of a consumption strategy is measured by not only one probability measure but as common in risk theory by a class of scenario measures. We formulate a dual version of the optimization problem and prove the existence of a saddle point and give a characterization of an optimal consumption strategy in terms of solutions of the dual problem. This generalizes results of Karatzas and Zitkovic (2003) for the optimal consumption problem under a fixed probability measure.

Date: 2005
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DOI: 10.1524/stnd.2005.23.1.1

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