Optimal consumption and portfolio choice with ambiguous interest rates and volatility

Qian Lin () and Frank Riedel
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Qian Lin: Wuhan University

Economic Theory, 2021, vol. 71, issue 3, No 12, 1189-1202

Abstract: Abstract We study continuous-time consumption and portfolio choice in the presence of Knightian uncertainty about interest rates. We develop the stochastic model that involves singular priors and analyze optimal behavior. When there is sufficiently large uncertainty about interest rates, the agent invests in the asset market only and abstains from the bond market.

Keywords: Portfolio Choice; Knightian Uncertainty; Model uncertainty; Interest Rate Ambiguity (search for similar items in EconPapers)
JEL-codes: D81 G11 G12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s00199-020-01306-9

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