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Robust generalized Merton-type financial portfolio models with generalized utility

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Abstract

We include the notion of uncertainty and incomplete information within the classical Merton’s portfolio model. Incomplete information on the set of preferences is interpreted by means of a set-valued utility function. The model is formulated as set-valued optimization problems by construction. We provide scalarization techniques and equivalent formulations to reduce the complexity. The proposed models are robust with respect to noise induced by statistical estimation or data bias. Illustrative examples show how our new formulations work.

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Authors and Affiliations

  1. Neoma Business School, Mont Saint-Aignan, France

    Fouad Ben Abdelaziz

  2. SKEMA Business School - Campus de Sophia Antipolis, Université Côte d’Azur, Sophia Antipolis, France

    Davide La Torre

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  1. Fouad Ben Abdelaziz
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  2. Davide La Torre
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Correspondence to Davide La Torre.

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Ben Abdelaziz, F., La Torre, D. Robust generalized Merton-type financial portfolio models with generalized utility. Ann Oper Res 330, 55–72 (2023). https://doi.org/10.1007/s10479-021-04051-x

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