Seminar


       Department of Systems Engineering and Engineering Management,

                    The Chinese University of Hong Kong

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Title:
Portfolio Optimization with Behavioral Criterion

Speaker:
Dr. Jin Hanqing
Systems Engineering & Engineering Management Dept
The Chinese University of Hong Kong

Date : September 28, 2005 (Wednesday)

Time : 5:30 p.m. - 6:30 p.m.

Venue : Room 602 (E-Service Lab), William M.W. Mong Engineering Building

(Engineering Building Complex Phase 2), CUHK



Abstract:

In studying decision making under uncertainty, expected utility has been the
pre-dominant criterion for a long time. Expected utility theory is based on a
precise axiomatic system; yet the axioms in this theory have been criticized
to be inconsistent with the decision-making people do in the real world. For
example, people tend to be risk-averse for uncertain profit and risk-seeking
for uncertain loss. To make the study closer to the real decision-making
process, Kahneman and Tvesky proposed the prospect theory which won a Nobel
prize. In this theory the utility function is of S-shape instead of being
concave, and the probability is distorted.

In this paper, we study the optimal portfolio selection within the framework
of prospect theory. Due to the absence of concavity, the problem is
essentially difficult compared with that using the expected utility criterion.
We overcome the difficulty by decomposing the problem into a positive-part and
a negative-part, and solving them respectively by different techniques.


Bio:

Dr. Jin is a Research Assistant Professor in the Department of Systems
Engineering & Engineering Management at the Chinese University of Hong Kong.
He received his MS in Mathematics from Nankai University in 2001, and the PhD
in Financial Engineering from Chinese University of Hong Kong in 2004. After
that, he stayed in the Department as a postdoctoral fellow for one year. His
research interests include Mathematical Finance, Operation Research, and
Stochastic Analysis. He published two papers in Mathematical Finance and one
in the Annals of the Institute of Henri Poncare.