Optimal portfolio choice for a behavioural investor in continuous-time markets

Miklós Rásonyi () and Andrea Rodrigues

Annals of Finance, 2013, vol. 9, issue 2, 318 pages

Abstract: The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time financial market framework and assuming that asset prices are modelled by semimartingales, we derive sufficient and necessary conditions for the well-posedness of the optimisation problem in the case of piecewise-power probability distortion and utility functions. Finally, under straightforwardly verifiable conditions, we further demonstrate the existence of an optimal strategy. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Behavioural optimal portfolio choice; Choquet integral; Continuous-time markets; Probability distortion; S-shaped utility (value) function; Well-posedness and existence; G11 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:9:y:2013:i:2:p:291-318

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DOI: 10.1007/s10436-012-0211-4

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