Optimal portfolio positioning under ambiguity

Hachmi Ben Ameur and Jean-Luc Prigent

Economic Modelling, 2013, vol. 34, issue C, 89-97

Abstract: This paper analyzes the optimality of financial portfolios when the investor has a utility with ambiguity aversion. It provides a general result about the optimal portfolio profile under ambiguity, in the Anscombe–Aumann framework, using the Maccheroni et al. (2006) approach which includes Gilboa and Schmeidler's (1989) multiple prior preferences and Hansen and Sargent's (2011) multiplier preferences. The paper then details the CRRA case with an ambiguity index based on relative entropy. Such findings have practical applications in structured portfolio management. Indeed, it is important to take account of uncertainty about the true values of financial parameters when determining the best portfolio profile.

Keywords: Portfolio optimization; Structured portfolio; Ambiguity (search for similar items in EconPapers)
JEL-codes: C61 G11 L10 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:34:y:2013:i:c:p:89-97

DOI: 10.1016/j.econmod.2012.12.005

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