Asset allocation: How much does model choice matter?

► Optimal portfolio decision in models with stochastic volatility and stochastic jumps. ► The structure of the risk premia is as important as the type of the model. ► Significant utility losses in case of model and risk premia mis-specifications. ► The results of omitting jumps in volatility can be devastating. ► A misestimation of the structure of the risk premia can lead to a loss of 4% per year.