We study optimal portfolio choices for an agent with the aim of maximising utility from terminal wealth within a market with liquidity costs. Under some mild conditions, we show the existence of optimal portfolios and that the marginal utility of the optimal terminal wealth serves as a change of...

Prospect theory (PT) has long been linked with the disposition effect. Despite significant progress towards rigorously modeling the trading behavior of PT investors, the literature has been largely silent on the effect of probability weighting. In this paper we incorporate probability weighting...

When prospect theory (PT) is applied in a dynamic context, the probability weighting component brings new challenges. We study PT agents facing optimal timing decisions and consider the impact of allowing them to follow randomized strategies. In a continuous-time model of gambling and optimal...

We study Cautious Stochastic Choice (CSC) agents facing optimal timing decisions in a dynamic setting. In an expected utility setting, the optimal strategy is always a threshold strategy - to stop/sell the first time the price process exits an interval. In contrast, we show that in the CSC...

This paper studies a variant of the contest model introduced by Seel and Strack. In the Seel-Strack contest, each agent or contestant privately observes a Brownian motion, absorbed at zero, and chooses when to stop it. The winner of the contest is the contestant who stops at the highest value....

In this article, we consider the optimal investment-consumption problem for an agent with preferences governed by Epstein-Zin stochastic differential utility who invests in a constant-parameter Black-Scholes-Merton market.The paper has three main goals: first, to provide a detailed introduction...

In this article we consider the infinite-horizon Merton investment-consumption problem in a constant-parameter Black-Scholes-Merton market for an agent with constant relative risk aversion R. The classical primal approach is to write down a candidate value function and to use a verification...