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Robust Utility Maximization with L\'evy Processes

Ariel Neufeld and Marcel Nutz

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Abstract: We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility and jump characteristics of the price process. We show that an optimal investment strategy exists and compute it in semi-closed form. Moreover, we provide a saddle point analysis describing a worst-case model.

New Economics Papers: this item is included in nep-upt
Date: 2015-02, Revised 2016-03
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Handle: RePEc:arx:papers:1502.05920