Article ID Journal Published Year Pages File Type
395336 Information Sciences 2007 13 Pages PDF
Abstract

This paper, adopting the recursive multiple-priors utility, studies the optimal consumption and portfolio choice in a Merton-style model with anticipation when there is a difference between ambiguity and risk. The fundamental issue is what the effects of ambiguity and anticipation on the investor’s behavior are. In the case of a logarithmic felicity function, the paper also shows that no hedging demand arises that is affected by both ambiguity and anticipation. Finally, the optimal portfolio is derived in terms of Malliavin derivatives and stochastic integrals.

Related Topics
Physical Sciences and Engineering Computer Science Artificial Intelligence
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