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On the Robust Merton Problem with Nondominated Priors

Kerem Ugurlu(keremu***at***uw.edu)

Abstract: We give explicit solutions for utility optimization problems in the presence of Knightian uncertainty in continuous time. We solve the robust optimization problem explicitly both when the investorís utility is of CRRA and of CARA type. We show that our problem formulation allows us to apply Sionís min max theorem and to solve the dual problem explicitly.

Keywords: Knightian uncertainty; Robust optimization

Category 1: Applications -- OR and Management Sciences (Finance and Economics )


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Entry Submitted: 06/03/2017
Entry Accepted: 06/04/2017
Entry Last Modified: 06/03/2017

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