Abstract:

This paper focuses on the optimal investment problem with model uncertainty under inflation. It is assumed that there are risk-free assets, risky assets and inflation-indexed bonds used to hedge inflation risk in the financial market, in which the price of risky assets obeys the CEV model, and then the price index level is used to discount the price of each type of asset to present its true price, and the investment model is built by applying the $\alpha$-maxmin mean-variance utility function and the equilibrium investment strategy and value function are obtained by solving the HJB equation. Finally, the trend of optimal investment strategies under parameter variations is analyzed by numerical simulation.

Key words: Inflation, Index bonds, Inflation discounting, $\alpha$-robust mean-variance criterion, CEV model