Multiple Priors And No-Transaction Region

Roman Kozhan ()

No 2006,4, Working Paper Series from European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe

Abstract: We study single period asset allocation problems of the investor who maximizes the expected utility with respect to non-additive beliefs. The non-additive beliefs of the investor model the presence of an uncertainty and they are assumed to be consistent with the Maxmin expected utility theory of Gilboa and Schmeidler (1989). The proportional transaction costs are incorporated into the model. We provide the explicit form solutions for the bounds of no-transaction regions which completely determine the optimal policy of the investor.

Keywords: uncertainty modelling; utility theory; maxmin portfolio selection; transaction costs (search for similar items in EconPapers)
JEL-codes: C44 C61 G11 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:euvgra:20064

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