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

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  • Huy N. Chau
  • Mikl'os R'asonyi

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.

Suggested Citation

  • 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.
  • Handle: RePEc:arx:papers:1606.07311
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    File URL: http://arxiv.org/pdf/1606.07311
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    References listed on IDEAS

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