Robust Utility Maximization With Lévy Processes
Published online on November 11, 2016
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 Lévy 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.