Optimal consumption and portfolio choice with ambiguous interest rates and volatility

We study continuous-time consumption and portfolio choice in the presence of Knightian uncertainty about interest rates. We develop the stochastic model that involves singular priors and analyze optimal behavior. When there is sufficiently large uncertainty about interest rates, the agent invests in the asset market only and abstains from the bond market.

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Year of publication:	2020
Authors:	Lin, Qian ; Riedel, Frank
Published in:	Economic Theory. - Berlin, Heidelberg : Springer, ISSN 1432-0479. - Vol. 71.2020, 3, p. 1189-1202
Publisher:	Berlin, Heidelberg : Springer
Subject:	Portfolio Choice \| Knightian Uncertainty \| Model uncertainty \| Interest Rate Ambiguity

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.1007/s00199-020-01306-9 [DOI] hdl:10419/288393 [Handle]
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; G11 - Portfolio Choice ; G12 - Asset Pricing
Source:	EconStor

Persistent link: https://www.econbiz.de/10014503877