Robust generalized Merton-type financial portfolio models with generalized utility

Fouad Ben Abdelaziz and Davide La Torre ()
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Fouad Ben Abdelaziz: Neoma Business School
Davide La Torre: SKEMA Business School - Campus de Sophia Antipolis, Université Côte d’Azur

Annals of Operations Research, 2023, vol. 330, issue 1, No 3, 55-72

Abstract: Abstract We include the notion of uncertainty and incomplete information within the classical Merton’s portfolio model. Incomplete information on the set of preferences is interpreted by means of a set-valued utility function. The model is formulated as set-valued optimization problems by construction. We provide scalarization techniques and equivalent formulations to reduce the complexity. The proposed models are robust with respect to noise induced by statistical estimation or data bias. Illustrative examples show how our new formulations work.

Keywords: Dynamic programming; Multiple criteria decision making; Merton’s portfolio model; Set-valued utility; Robust optimization (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10479-021-04051-x

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