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

Miklos Rasonyi, Andrea Rodrigues

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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.
Original languageEnglish
Pages (from-to)291-318
JournalAnnals of Finance
Volume9
Issue number2
Early online date1 Dec 2012
DOIs
Publication statusPublished - May 2013

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