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.

Robust generalized Merton-type financial portfolio models with generalized utility / F. Ben Abdelaziz, D. La Torre. - In: ANNALS OF OPERATIONS RESEARCH. - ISSN 0254-5330. - (2021), pp. 1-18. [Epub ahead of print] [10.1007/s10479-021-04051-x]

Robust generalized Merton-type financial portfolio models with generalized utility

D. La Torre
Secondo
2021

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.
Dynamic programming; Merton’s portfolio model; Multiple criteria decision making; Robust optimization; Set-valued utility
Settore MAT/09 - Ricerca Operativa
2021
31-mar-2021
Article (author)
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/963681
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