Optimal consumption and portfolio choice with ambiguity

Lin Q, Riedel F (2014) Center for Mathematical Economics Working Papers; 497.
Bielefeld: Center for Mathematical Economics.

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Abstract
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of non-equivalent multiple priors. We solve the problem completely by identifying the worst-case measure. Our setup also allows to consider interest rate uncertainty; we show that under some robust parameter constellations, the investor optimally puts all his wealth into the asset market, and does not save or borrow at all.
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Lin Q, Riedel F. Optimal consumption and portfolio choice with ambiguity. Center for Mathematical Economics Working Papers. Vol 497. Bielefeld: Center for Mathematical Economics; 2014.
Lin, Q., & Riedel, F. (2014). Optimal consumption and portfolio choice with ambiguity (Center for Mathematical Economics Working Papers, 497). Bielefeld: Center for Mathematical Economics.
Lin, Q., and Riedel, F. (2014). Optimal consumption and portfolio choice with ambiguity. Center for Mathematical Economics Working Papers, 497, Bielefeld: Center for Mathematical Economics.
Lin, Q., & Riedel, F., 2014. Optimal consumption and portfolio choice with ambiguity, Center for Mathematical Economics Working Papers, no.497, Bielefeld: Center for Mathematical Economics.
Q. Lin and F. Riedel, Optimal consumption and portfolio choice with ambiguity, Center for Mathematical Economics Working Papers, vol. 497, Bielefeld: Center for Mathematical Economics, 2014.
Lin, Q., Riedel, F.: Optimal consumption and portfolio choice with ambiguity. Center for Mathematical Economics Working Papers, 497. Center for Mathematical Economics, Bielefeld (2014).
Lin, Qian, and Riedel, Frank. Optimal consumption and portfolio choice with ambiguity. Bielefeld: Center for Mathematical Economics, 2014. Center for Mathematical Economics Working Papers. 497.
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