Optimal Portfolio Positioning on Multiple Assets Under Ambiguity

Hachmi Ben Ameur (), Mouna Boujelbène (), Jean-Luc Prigent and Emna Triki ()
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Hachmi Ben Ameur: INSEEC Business School
Mouna Boujelbène: Mouna Boujelbène Abbes, FSEG SFAX (UREA)
Emna Triki: ThEMA, University of Cergy-Pontoise

Computational Economics, 2020, vol. 56, issue 1, No 3, 57 pages

Abstract: Abstract This paper determines the optimal financial portfolio in the multidimensional setting when the investor exhibits ambiguity aversion. We consider the Maccheroni et al. (Econometrica 74(6):1447–1498, 2006) framework which includes both the Gilboa and Schmeidler’s (J Math Econ 18(2):141–153, 1989) multiple priors preferences and the (American Econ Rev 91:60–66, 2001) multiplier preferences. We determine the optimal portfolio profile under ambiguity when the investors can invest on various risky assets. We investigate in particular the CRRA case while introducing an ambiguity index based on the relative entropy criterion. Such result extends Ben Ameur and Prigent (Econ Model 34:89–97, 2013) when there is only one risky asset. Indeed, we show for example how the ambiguity on the correlations between the risky assets crucially modify the optimal payoff. Such results have important practical applications in structured portfolio management when investing on multiple financial indices and basket options.

Keywords: Portfolio optimization; Ambiguity; Multiple assets; Structured portfolio (search for similar items in EconPapers)
JEL-codes: C61 G11 L10 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10614-019-09894-y

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