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All wealth in assets is optimal under interest rate uncertainty

Author

Listed:
  • Lin, Qian

    (Center for Mathematical Economics, Bielefeld University)

  • Riedel, Frank

    (Center for Mathematical Economics, Bielefeld University)

Abstract

This note shows that a long term investor who faces considerable Knightian uncertainty about the future evolution of interest rates optimally puts all his wealth into risky assets.

Suggested Citation

  • Lin, Qian & Riedel, Frank, 2025. "All wealth in assets is optimal under interest rate uncertainty," Center for Mathematical Economics Working Papers 711, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:711
    as

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    File URL: https://pub.uni-bielefeld.de/download/3004628/3004629
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    References listed on IDEAS

    as
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    3. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
    4. George Chacko & Luis M. Viceira, 2005. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," The Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1369-1402.
    5. Zengjing Chen & Larry Epstein, 2002. "Ambiguity, Risk, and Asset Returns in Continuous Time," Econometrica, Econometric Society, vol. 70(4), pages 1403-1443, July.
    6. Jianjun Miao, 2009. "Ambiguity, Risk and Portfolio Choice under Incomplete Information," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 257-279, November.
    Full references (including those not matched with items on IDEAS)

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