# Distributionally robust portfolio maximisation and marginal utility pricing in one period financial markets

arXiv: https://arxiv.org/abs/2105.00935 · HTML: https://mlsanity.com/paper/2105.00935/

## Key facts

- Cited by 2 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 3 May 2021.

## Built on by (most cited first, 2 of 2)

- [Wasserstein Distributionally Robust Optimization with Wasserstein Barycenters](https://mlsanity.com/paper/2203.12136/) (2022)
- [Markov Decision Processes under Model Uncertainty](https://mlsanity.com/paper/2206.06109/) (2022)

## Abstract (arXiv)

We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their value function, optimal investment policy and marginal option prices to model uncertainty. The latter is understood as replacing a baseline model mathbbP with an adverse choice from a small Wasserstein ball around mathbbP in the space of probability measures. Our sensitivities are thus fully non-parametric. We show that the results entangle the baseline model specification and the agent's risk attitudes. The sensitivities can behave in a non-monotone way as a function of the baseline model's Sharpe's ratio, the relative weighting of assets in an agent's portfolio can change and marginal prices can increase when an agent faces model uncertainty.