Dynamic Portfolio Choice under Time-Varying,Jumps,and Knight Uncertainty of Asset Return Process

摘要

By introducing a stochastic element to the double-jump diffusion framework to measure the Knight uncertainty of asset return process,the model of dynamic portfolio choice was built,which maximized the expected utility of terminal portfolio wealth.Through specifying the state function of uncertainty-aversion,it utilized the max-min method to derive the analytical solution of the model to study the effect of time-varying,jumps,and Knight uncertainty of asset return process on dynamic portfolio choice and their interactions.Results of comparative analysis show:the time-varying results in positive or negative intertemporal hedging demand of portfolio,which depends on the coefficient of investor's risk aversion and the correlation coefficient between return shift and volatility shift;the jumps in asset return overall reduce investor's demand for the risky asset,which can be enhanced or weakened by the jumps in volatility;due to the existing of Knight uncertainty,the investor avoids taking large position on risky asset,and improves portfolio's steady and immunity;the effects of the time-varying,jumps,and Knight uncertainty are interactive.