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Skorohod's representation theorem and optimal strategies for markets with frictions

Huy N. Chau and Mikl\'os R\'asonyi

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Abstract: We prove the existence of optimal strategies for agents with cumulative prospect theory preferences who trade in a continuous-time illiquid market, transcending known results which pertained only to risk-averse utility maximizers. The arguments exploit an extension of Skorohod's representation theorem for tight sequences of probability measures. This method is applicable in a number of similar optimization problems.

New Economics Papers: this item is included in nep-mic and nep-upt
Date: 2016-06, Revised 2017-04
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