Optimal investment strategies under the relative performance in jump-diffusion markets

Burcu Aydoğan () and Mogens Steffensen ()
Additional contact information
Burcu Aydoğan: RWTH Aachen University
Mogens Steffensen: University of Copenhagen

Decisions in Economics and Finance, 2025, vol. 48, issue 1, No 11, 179-204

Abstract: Abstract We work on a portfolio management problem for one agent and a large group of agents under relative performance concerns in jump-diffusion markets with the CRRA utility function. Herein, we define two wealth dynamics: the agent’s and the group’s wealth. We measure the performances of both the agent and the group with preferences linked to the group performance. Therefore, we have stochastic optimal control problems for both the representative agent and the group to determine what the group does and the agent’s optimal proportion in the portfolio relative to the group’s performance. Further, our framework assumes that the agent’s performance does not affect the group, while the group affects the agent’s utility. Moreover, we investigate special cases where all agents in the market are homogeneous in their risk aversion and relative performances. We explore the qualitative behavior of the agent and show some numerical results depending on her relative performance consideration and risk tolerance degree.

Keywords: Portfolio management; Relative performance; Jump-diffusion; Stochastic optimal control (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10203-024-00499-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:decfin:v:48:y:2025:i:1:d:10.1007_s10203-024-00499-1

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10203/PS2

DOI: 10.1007/s10203-024-00499-1

Access Statistics for this article

Decisions in Economics and Finance is currently edited by Paolo Ghirardato

More articles in Decisions in Economics and Finance from Springer, Associazione per la Matematica
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().