Robust Control and CAPMs under a Quadratic Security Market Model
Bolorsuvd Batbold,
Kentaro Kikuchi,
Koji Kusuda
Abstract:This study assumes homothetic robust Epstein-Zin utility and analyzes the consumption-investment problem and CAPMs under a quadratic security market model in which interest rates, the market price of risk, the variances and covariances of asset returns, and inflation rates are stochastic. First, we demonstrate that homothetic robust Epstein-Zin utility is interpreted as homothetic stochastic differential utility. Then, we show that robust investors determine the ''worst-case probability'' and the optimal consu… Show more
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.