2019/04/20 by Lin, Qian, Sun, Xianming, Zhou, Chao
#FOS: Economics and business #Mathematical Finance (q-fin.MF)
paper · doi:10.48550/arxiv.1904.09379
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process, reflecting an investor's dynamic preference. We show that the market risk premium and the utility risk premium jointly determine the investors' trading direction and the worst-case scenarios of the risky asset's mean return and volatility. The closed-form formulas for the optimal investment strategies are given in the special settings of the CRRA preference.