Equilibrium selection for multi-portfolio optimization

Lorenzo Lampariello, Christoph Neumann, Jacopo M. Ricci, Simone Sagratella and Oliver Stein

European Journal of Operational Research, 2021, vol. 295, issue 1, 363-373

Abstract: We analyze a Nash equilibrium problem arising when trades from different accounts are pooled for execution. We introduce a new general multi-portfolio model and state sufficient conditions for the monotonicity of the underlying Nash equilibrium problem. Monotonicity makes it possible to treat the problem numerically and, for the case of nonunique equilibria, to solve hierarchical problems of equilibrium selection. We also give sufficient conditions for the Nash equilibrium problem formulation to be a potential game. Our computational experience confirms the theoretical insights and substantiates the significance of the equilibrium selection.

Keywords: Game theory; Nash equilibrium problem; Hierarchical optimization; Variational inequalities; Portfolio selection (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:295:y:2021:i:1:p:363-373

DOI: 10.1016/j.ejor.2021.02.033

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