An agent, in prospect theory:
- is loss-averse, and so weighs losses (relative to some reference point) more strongly than gains
- is risk-averse with respect to gains, but risk-seeking with respect to losses
- uses probability weighting: small probabilities count more and larger probabilities count less than they would under expected utility.
- Shane Legg on prospect theory and computational finance by Roko
- Prospect Theory: A Framework for Understanding Cognitive Biases by Yvain
- Prospect theory at Psychology Wiki