We investigate the portfolio optimization problem of a cumulative prospect theory (CPT) financial agent who is investing in a financial market consisting of multiple risky assets and one risk-free asset.

Portfolio separation results are obtained when the distribution of the risky assets is elliptical or generalized hyperbolic (GH) skewed.

A sensitivity analysis of optimal portfolio composition with respect to agent's risk specific parameters is performed. The presence of skewness in the risky assets returns is observed to have a considerable impact on the distribution of the CPT agent's portfolio, and it leads to more conservative investment decisions. In a multi period setting, stochastic interest rates make the CPT portfolio optimization problem time inconsistent; we present an investment strategy within this setting. This is a joint work with Klaas Schulze, Minsuk Kwak and Liurui Deng.

Traian Pirvu obtained his doctorate in mathematical finance from Carnegie Melon University in 2005 under the supervision of the well known author and researcher Steven Shreve. He then held a postdoctoral position at The University of British Columbia and PIMS. Since 2008 he holds a professorship at McMaster University. He has done extensive research on the foundations of mathematical finance, in areas such as the theory of risk measures, optimal consumption and investment with risk limits, time-consistency of decision makers and equilibrium pricing of non tradable risks.