Mathematicalising behavioural finance

Journal article

This article presents an overview of the recent development on mathematical treatment of behavioural finance, primarily in the setting of continuous-time portfolio choice under the cumulative prospect theory. Financial motivations and mathematical challenges of the problem are highlighted. It is demonstrated that the solutions to the problem have in turn led to new financial and mathematical problems and machineries.

Authors: Zhou, X

• Journal: Proceedings of the International Congress of Mathematicians 2010, ICM 2010
• Pages: 3185-3209
• Publication date: 2010-01-01
• Language: English
• Keywords: SP/A theory; Continuous time; Behavioural finance; S-shaped function; Reference point; Quantile formulation; Cumulative prospect theory; Portfolio selection; Choquet integral; Probability distortion; Yaari's criterion