Robust portfolio optimization with multi-factor stochastic volatility
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Abstract: This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without derivative trading. To illustrate the effects of ambiguity, we compare our optimal robust strategy with some strategies that ignore the information of uncertainty, and provide the corresponding welfare analysis. The effects of derivative trading to the optimal portfolio selection are also discussed by considering alternative strategies. Our study is further extended to the cases with jump risks in asset price and correlated volatility factors, respectively. Numerical experiments are provided to demonstrate the behavior of the optimal portfolio and utility loss.
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Cited in
(13)- Robust equilibrium strategies for time-inconsistent stochastic optimal control problems with applications
- Continuous time mean-variance-utility portfolio problem and its equilibrium strategy
- Robust portfolio optimization under hybrid CEV and stochastic volatility
- Distributionally robust portfolio optimization with linearized STARR performance measure
- Robust time-consistent mean-variance portfolio selection problem with multivariate stochastic volatility
- Robust optimal investment problem with delay under Heston's model
- Equilibrium strategy for mean-variance-utility portfolio selection under Heston's SV model
- Robustness of stable volatility strategies
- Portfolio optimization and a factor model in a stochastic volatility market
- Portfolio optimization with ambiguous correlation and stochastic volatilities
- Valuation of European crude oil options with co-jump diffusions and stochastic interest rate
- Robust scenario optimization based on downside-risk measure for multi-period portfolio selection
- Robust multivariate portfolio choice with stochastic covariance in the presence of ambiguity
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