Reaching goals under ambiguity: Continuous-time optimal portfolio selection

2018 ◽  
Vol 137 ◽  
pp. 63-69
Author(s):  
Shaolin Ji ◽  
Xiaomin Shi
Keyword(s):  
Portfolio Selection ◽  
Continuous Time ◽  
Optimal Portfolio ◽  
Time Optimal ◽  
Optimal Portfolio Selection

scholarly journals The Optimal Portfolio Selection Model underg-Expectation

2014 ◽  
Vol 2014 ◽  
pp. 1-12 ◽  
Author(s):  
Li Li
Keyword(s):  
Prospect Theory ◽  
Decision Rule ◽  
Portfolio Selection ◽  
Continuous Time ◽  
Optimal Solution ◽  
Selection Model ◽  
Optimal Portfolio ◽  
Optimal Portfolio Selection ◽  
Choquet Expectation ◽  
Portfolio Selection Model

This paper solves the optimal portfolio selection model under the framework of the prospect theory proposed by Kahneman and Tversky in the 1970s with decision rule replaced by theg-expectation introduced by Peng. This model was established in the general continuous time setting and firstly adopted theg-expectation to replace Choquet expectation adopted in the work of Jin and Zhou, 2008. Using different S-shaped utility functions andg-functions to represent the investors' different uncertainty attitudes towards losses and gains makes the model not only more realistic but also more difficult to deal with. Although the models are mathematically complicated and sophisticated, the optimal solution turns out to be surprisingly simple, the payoff of a portfolio of two binary claims. Also I give the economic meaning of my model and the comparison with that one in the work of Jin and Zhou, 2008.

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