Università della Svizzera italiana

Risk, robustness and knightian uncertainty in continuous-time, heterogenous agents, financial equilibria

Trojani, Fabio ; Vanini, Paolo

We analyze and compare analytically continuous-time financial equilibria where heterogeneous risk averse investors care about model misspecification through some preference for robustness and in the presence of a stochastic opportunity set. This incorporates a concern for model misspecification into equilibrium asset prices. Since no exact equilibrium computations are possible in this model...

Università della Svizzera italiana

A review of perturbative approaches for robust optimal portfolio problems

Trojani, Fabio ; Vanini, Paolo

In: Computational methods in decision-making, economics and finance, 2002, p. 109

Only a few intertemporal optimal consumption and portfolio problems in partial and general equilibrium can be solved explicitly. It is illustrated in the paper that perturbation theory is a powerful tool for deriving approximate analytical solutions for the desired optimal policies in problems where general state dynamics are admitted and a preference for robustness is present. Starting from the...