Ricerc@Sapienza

Investors often need to look for an optimal portfolio acting under ambiguity, as they may not be able to single out a unique realworld probability measure. In this paper a discrete-time dynamic portfolio selection problem is studied, referring to an -contaminated binomial market model and assuming investors’ preferences are consistent with the Choquet expected utility theory. We formulate the portfolio selection problem for a CRRA utility function in terms of the terminal wealth, and provide a characterization of the optimal solution in the case stock price returns are uniformly distributed. In this case, we further investigate the effect of the contamination parameter epsilon on the optimal portfolio.