A study of robust portfolio optimization with European options using polyhedral uncertainty sets

We consider the problem of maximizing the worst-case return of a portfolio when the manager can invest in stocks as well as European options on those stocks, and the stock returns are modeled using an uncertainty set approach. Specifically, the manager knows a range forecast for each factor driving the returns and a budget of uncertainty limiting the scaled deviations of these factors from their nominal values. Our goal is to understand the...