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Robust generalized Merton-type financial portfolio models with generalized utility

Author

Listed:
  • Fouad Ben Abdelaziz

    (Neoma Business School)

  • Davide La Torre

    (SKEMA Business School - Campus de Sophia Antipolis, Université Côte d’Azur)

Abstract

We include the notion of uncertainty and incomplete information within the classical Merton’s portfolio model. Incomplete information on the set of preferences is interpreted by means of a set-valued utility function. The model is formulated as set-valued optimization problems by construction. We provide scalarization techniques and equivalent formulations to reduce the complexity. The proposed models are robust with respect to noise induced by statistical estimation or data bias. Illustrative examples show how our new formulations work.

Suggested Citation

  • Fouad Ben Abdelaziz & Davide La Torre, 2023. "Robust generalized Merton-type financial portfolio models with generalized utility," Annals of Operations Research, Springer, vol. 330(1), pages 55-72, November.
    • Handle: RePEc:spr:annopr:v:330:y:2023:i:1:d:10.1007_s10479-021-04051-x
    DOI: 10.1007/s10479-021-04051-x
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