Models can be wrong and recognising their limitations is important in financial and economic decision making under uncertainty. Robust strategies, which are least sensitive to perturbations of the underlying model, take uncertainty into account. Finding the explicit set of alternative models...

Models can be wrong and recognising their limitations is important in financial and economic decision making under uncertainty. Robust strategies, which are least sensitive to perturbations of the underlying model, take uncertainty into account. Finding the explicit set of alternative models...

We study portfolio choice in a Black-Scholes world under drift uncertainty. Preferences towards risk and ambiguity are modeled using the smooth ambiguity approach under a double power utility assumption and a normal distribution assumption on the unknown drift. Optimal investment in this setting...

We study aversion to model ambiguity and misspecification in dynamic portfolio choice. Investors with relative risk aversion gamma 1 fear return persistence, while risk-tolerant investors (0 gamma 1) fear return mean reversion, to confront model misspecification concerns when facing a model...