Special Session 61: 

Stochastic Maximum Principle on a Continuous-time Behavioral Portfolio Model

Qizhu Liang
University of Macau
Peoples Rep of China
Co-Author(s):    Jie Xiong
Abstract:
Within the framework of Kahneman and Tversky`s cumulative prospective theory, this paper considers a continuous-time behavioral portfolio selection model, which includes both running and terminal terms in the objective functional. Despite the existence of S-shaped utility functions and probability distortions, a necessary condition for optimality is derived by stochastic maximum principle.