  This paper studies a robust portfolio optimization problem under the
multi-factor volatility model introduced by Christoffersen et al. (2009). The
optimal strategy is derived analytically under the worst-case scenario with or
without derivative trading. To illustrate the effects of ambiguity, we compare
our optimal robust strategy with some strategies that ignore the information of
uncertainty, and provide the corresponding welfare analysis. The effects of
derivative trading to the optimal portfolio selection are also discussed by
considering alternative strategies. Our study is further extended to the cases
with jump risks in asset price and correlated volatility factors, respectively.
Numerical experiments are provided to demonstrate the behavior of the optimal
portfolio and utility loss.
