Optimal investment under behavioural criteria - a dual approach

Miklós Rásonyi, and José G. Rodríguez-Villarreal. "Optimal investment under behavioural criteria - a dual approach." Banach Center Publications 104.1 (2015): 167-180. <http://eudml.org/doc/281760>.

@article{MiklósRásonyi2015,
abstract = { We consider a discrete-time, generically incomplete market model and a behavioural investor with power-like utility and distortion functions. The existence of optimal strategies in this setting has been shown in Carassus-Rásonyi (2015) under certain conditions on the parameters of these power functions. In the present paper we prove the existence of optimal strategies under a different set of conditions on the parameters, identical to the ones in Rásonyi-Rodrigues (2013), which were shown to be necessary and sufficient in the Black-Scholes model. We also relax some assumptions of Carassus-Rásonyi (2015). Although there exists no natural dual problem for optimisation under behavioural criteria (due to the lack of concavity), we will rely on techniques based on the usual duality between attainable contingent claims and equivalent martingale measures. },
author = {Miklós Rásonyi, José G. Rodríguez-Villarreal},
journal = {Banach Center Publications},
keywords = {cumulative prospect theory; behavioural investors; optimal portfolio choice; probability distortion; non-concave utility; well-posedness and existence},
language = {eng},
number = {1},
pages = {167-180},
title = {Optimal investment under behavioural criteria - a dual approach},
url = {http://eudml.org/doc/281760},
volume = {104},
year = {2015},
}

TY - JOUR
AU - Miklós Rásonyi
AU - José G. Rodríguez-Villarreal
TI - Optimal investment under behavioural criteria - a dual approach
JO - Banach Center Publications
PY - 2015
VL - 104
IS - 1
SP - 167
EP - 180
AB - We consider a discrete-time, generically incomplete market model and a behavioural investor with power-like utility and distortion functions. The existence of optimal strategies in this setting has been shown in Carassus-Rásonyi (2015) under certain conditions on the parameters of these power functions. In the present paper we prove the existence of optimal strategies under a different set of conditions on the parameters, identical to the ones in Rásonyi-Rodrigues (2013), which were shown to be necessary and sufficient in the Black-Scholes model. We also relax some assumptions of Carassus-Rásonyi (2015). Although there exists no natural dual problem for optimisation under behavioural criteria (due to the lack of concavity), we will rely on techniques based on the usual duality between attainable contingent claims and equivalent martingale measures.
LA - eng
KW - cumulative prospect theory; behavioural investors; optimal portfolio choice; probability distortion; non-concave utility; well-posedness and existence
UR - http://eudml.org/doc/281760
ER -