CONTINUOUS-TIME PORTFOLIO SELECTION UNDER AMBIGUITY

In a financial market, the appreciation rates of stocks are statistically difficult to estimate, and typically only some confidence intervals in which the rates reside can be estimated. In this paper we study continuous-time portfolio selection under ambiguity, in the sense that the appreciation rates are only known to be in a certain convex closed set and the portfolios are allowed to be based on only the historical stocks prices. We formulate the problem in both the expected utility and the mean variance frameworks, and derive robust portfolios explicitly for both models.