In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the decision over when to sell, the agent has to choose a...

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...

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...

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...

This paper investigates option prices in an incomplete stochastic volatility model with correlation. In a general setting, we prove an ordering result which says that prices for European options with convex payoffs are decreasing in the market price of volatility risk.As an example, and as our...