Mobility

Portfolio Optimization Under Model Uncertainty And BSDE Games

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Executive Summary

The authors consider some robust optimal portfolio problems for markets modeled by (possibly non-Markovian) jump diffusions. Mathematically the situation can be described as a stochastic differential game, where one of the players (the agent) is trying to find the portfolio which maximizes the utility of her terminal wealth, while the other player ("The market") is controlling some of the unknown parameters of the market (e.g. the underlying probability measure, representing a model uncertainty problem) and is trying to minimize this maximal utility of the agent. This leads to a worst case scenario control problem for the agent.

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