, Volume 9, Issue 2, pp 291-318
Date: 16 Nov 2012

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

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


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.