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Optimal Portfolio Positioning on Multiple Assets Under Ambiguity

Author

Listed:
  • Hachmi Ben Ameur

    (Amiens School of Management - Amiens School of Management)

  • Mouna Boujelbène
  • Jean-Luc Prigent

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Emna Triki

Abstract

This paper determines the optimal financial portfolio in the multidimensional setting when the investor exhibits ambiguity aversion. We consider the Maccheroni et al. (Econometrica 74(6):1447–1498, 2006) framework which includes both the Gilboa and Schmeidler’s (J Math Econ 18(2):141–153, 1989) multiple priors preferences and the (American Econ Rev 91:60–66, 2001) multiplier preferences. We determine the optimal portfolio profile under ambiguity when the investors can invest on various risky assets. We investigate in particular the CRRA case while introducing an ambiguity index based on the relative entropy criterion. Such result extends Ben Ameur and Prigent (Econ Model 34:89–97, 2013) when there is only one risky asset. Indeed, we show for example how the ambiguity on the correlations between the risky assets crucially modify the optimal payoff. Such results have important practical applications in structured portfolio management when investing on multiple financial indices and basket options.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Hachmi Ben Ameur & Mouna Boujelbène & Jean-Luc Prigent & Emna Triki, 2020. "Optimal Portfolio Positioning on Multiple Assets Under Ambiguity," Post-Print hal-03679693, HAL.
    • Handle: RePEc:hal:journl:hal-03679693
    DOI: 10.1007/s10614-019-09894-y
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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