Robust asset allocation under model risk
Tobelem-Foldvari, S. & Barrieu, P.
(2009).
Robust asset allocation under model risk.
Risk Magazine,
76, 91-95.
(2009).
Robust asset allocation under model risk.
Risk Magazine,
76, 91-95.
Financial investors often develop a multitude of models to explain financial securities’ dynamics, none of which they can fully trust. model risk (also referred to as ambiguity) prevents investors from using the classical framework of expected utility maximisation to calculate optimal portfolio allocations. We propose an easily implementable approach to account for model risk in a robust way.