We consider an asset allocation problem in a continuous-time model with stochastic volatility and jumps in both the asset price and its volatility. First, we derive the optimal portfolio for an investor with constant relative risk aversion. The demand for jump risk includes a hedging component,...

We analyze the optimal stock-bond portfolio under both learning and ambiguity aversion. Stock returns are predictable by an observable and an unobservable predictor, and the investor has to learn about the latter. Furthermore, the investor is ambiguity-averse and has a preference for investment...

The paper introduces a model for the joint dynamics of asset prices which can capture both a stochastic correlation between stock returns as well as between stock returns and volatilities (stochastic leverage). By relying on two factors for stochastic volatility, the model allows for stochastic...

This paper analyzes the optimal portfolio decision of a CRRA investor in models with stochastic volatility and stochastic jumps. The investor follows a buy-and-hold strategy in the stock, the money market account, and one additional derivative. We show that both the type of the model and the...

We analyze the portfolio planning problem of an ambiguity averse investor. The stock follows a jump-diffusion process. We find that there are pronounced differences between ambiguity aversion with respect to diffusion risk and jump risk. Ignoring ambiguity with respect to jump risk causes larger...