New concept for the value function of prospect theory
In prospect theory, the value function is typically concave for gains and convex for losses, with losses usually having a steeper slope than gains. The neural system responds differently to losses and gains. Five new studies on neurons related to this issue have examined neuronal responses to losses...
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| Format: | Article |
| Language: | English |
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AIMS Press
2024-11-01
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| Series: | Quantitative Finance and Economics |
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| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2024028 |
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| _version_ | 1832590265154535424 |
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| author | Kazuo Sano |
| author_facet | Kazuo Sano |
| author_sort | Kazuo Sano |
| collection | DOAJ |
| description | In prospect theory, the value function is typically concave for gains and convex for losses, with losses usually having a steeper slope than gains. The neural system responds differently to losses and gains. Five new studies on neurons related to this issue have examined neuronal responses to losses, gains, and reference points. This study investigated a new concept of the value function. A value function with a neuronal cusp may exhibit variations and behavioral cusps associated with catastrophic events, potentially influencing a trader's decision to close a position. Additionally, we have conducted empirical studies on algorithmic trading strategies that employ different value function specifications. |
| format | Article |
| id | doaj-art-7c7839cef65f40b28cc81916948634fc |
| institution | Kabale University |
| issn | 2573-0134 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj-art-7c7839cef65f40b28cc81916948634fc2025-01-24T01:12:54ZengAIMS PressQuantitative Finance and Economics2573-01342024-11-018473375610.3934/QFE.2024028New concept for the value function of prospect theoryKazuo Sano0SOBIN Institute LLC, 3-38-7 Keyakizaka, Kawanishi, Hyogo, 666-0145, JapanIn prospect theory, the value function is typically concave for gains and convex for losses, with losses usually having a steeper slope than gains. The neural system responds differently to losses and gains. Five new studies on neurons related to this issue have examined neuronal responses to losses, gains, and reference points. This study investigated a new concept of the value function. A value function with a neuronal cusp may exhibit variations and behavioral cusps associated with catastrophic events, potentially influencing a trader's decision to close a position. Additionally, we have conducted empirical studies on algorithmic trading strategies that employ different value function specifications.https://www.aimspress.com/article/doi/10.3934/QFE.2024028anterior cingulate cortex (acc)lateral habenula (lhb)orbitofrontal cortex (ofc)dorsal striatum (ds)ventral striatum (vs)anterior insular cortex (aic) |
| spellingShingle | Kazuo Sano New concept for the value function of prospect theory Quantitative Finance and Economics anterior cingulate cortex (acc) lateral habenula (lhb) orbitofrontal cortex (ofc) dorsal striatum (ds) ventral striatum (vs) anterior insular cortex (aic) |
| title | New concept for the value function of prospect theory |
| title_full | New concept for the value function of prospect theory |
| title_fullStr | New concept for the value function of prospect theory |
| title_full_unstemmed | New concept for the value function of prospect theory |
| title_short | New concept for the value function of prospect theory |
| title_sort | new concept for the value function of prospect theory |
| topic | anterior cingulate cortex (acc) lateral habenula (lhb) orbitofrontal cortex (ofc) dorsal striatum (ds) ventral striatum (vs) anterior insular cortex (aic) |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2024028 |
| work_keys_str_mv | AT kazuosano newconceptforthevaluefunctionofprospecttheory |