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Behavioural investors in conic market models

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  • Huy N. Chau
  • Miklos Rasonyi

Abstract

We treat a fairly broad class of financial models which includes markets with proportional transaction costs. We consider an investor with cumulative prospect theory preferences and a non-negativity constraint on portfolio wealth. The existence of an optimal strategy is shown in this context in a class of generalized strategies.

Suggested Citation

  • Huy N. Chau & Miklos Rasonyi, 2019. "Behavioural investors in conic market models," Papers 1903.08156, arXiv.org.
    • Handle: RePEc:arx:papers:1903.08156
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    References listed on IDEAS

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    1. Huy N. Chau & Mikl'os R'asonyi, 2016. "Skorohod's representation theorem and optimal strategies for markets with frictions," Papers 1606.07311, arXiv.org, revised Apr 2017.
    2. Laurence Carassus & Miklós Rásonyi, 2015. "On Optimal Investment For A Behavioral Investor In Multiperiod Incomplete Market Models," Mathematical Finance, Wiley Blackwell, vol. 25(1), pages 115-153, January.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    5. Yuri Kabanov, 2009. "Markets with Transaction Costs. Mathematical Theory," Post-Print hal-00488168, HAL.
    6. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    7. Hanqing Jin & Xun Yu Zhou, 2008. "Behavioral Portfolio Selection In Continuous Time," Mathematical Finance, Wiley Blackwell, vol. 18(3), pages 385-426, July.
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