Optimal investment under behavioural criteria — a dual approach
Volume 104 / 2015
Banach Center Publications 104 (2015), 167-180
MSC: 91G10, 91B16.
DOI: 10.4064/bc104-0-9
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.
