Biagini, S.Pınar, M. Ç.2018-04-122018-04-1220171862-9679http://hdl.handle.net/11693/37455We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. Confidence is here represented using ellipsoidal uncertainty sets for the drift, given a (compact valued) volatility realization. This specification affords a simple and concise analysis, as the agent becomes observationally equivalent to one with constant, worst case parameters. The result is based on a max–min Hamilton–Jacobi–Bellman–Isaacs PDE, which extends the classical Merton problem and reverts to it for an ambiguity-neutral investor.EnglishEllipsoidal uncertainty on mean returnsHamilton–Jacobi–Bellman–Isaacs equationMerton problemRobust optimizationVolatility uncertaintyArticle10.1007/s11579-016-0168-61862-9660