In this paper we develop a model of intertemporal portfolio choice where an investor accounts explicitly for the possibility of model misspecification. This work is motivated by the difficulty in estimating precisely the probability law for asset returns. Our contribution is to develop a...

In this article, we wish to understand: (i) the valuation of a non-redundant derivative in an economy where agents are heterogenous, (ii) the role of such a derivative in an investor's dynamic portfolio strategy, and (iii) the effect of introducing this derivative on the prices of more primitive...