implies that changes in Y2 should be hedged and its uncertainty priced, with this price containing risk and ambiguity … components. Ambiguity impacts asset pricing through two channels: the price of uncertainty associated with the ambiguous state … variable, Y2, and the interest rate. With ambiguity, the equilibrium price of uncertainty associated with Y2 and the …

We derive a closed-form solution for the price of a European call option in the presence of ambiguity about the … a particular case of ours, corresponding to the case in which there is no ambiguity (uncertainty is exclusively risk …). In the presence of ambiguity, the variance uncertainty price becomes either a convex or a concave function of the …

to assess if this continues to be true in the presence of ambiguity. Adopting robust control and perturbation theory … techniques, we study the problem of a long-horizon investor with recursive preferences that faces ambiguity about the stochastic … processes that generate the investment opportunity set. We find that ambiguity impacts portfolio choice, with the relevant …

We introduce ambiguity about the variance of the risky asset's return in the model of Chacko and Viceira (2005) for … portfolio continuously (as a function of the instantaneous variance), ambiguity has no impact. To shed some light on the case in … which continuous portfolio updating is not possible, we also evaluate the effect of ambiguity when investors must use their …