Predictable Relative Forward Performance Processes: Multi-agent and Mean Field Games for Portfolio Management

Abstract. We introduce predictable relative forward performance processes (PRFPP) as a new framework for studying portfolio management within a competitive and incomplete market environment. Each agent trades a distinct stock following a binomial distribution with probabilities for a positive return depending on the market regime characterized by a nontraded stochastic factor. For both the finite population and mean field games, we construct and analyse PRFPPs for initial data of the CARA class along with the associated equilibrium strategies. We find that relative performance concerns do not necessarily lead to more investment in the risky asset compared to when there are no such concerns. Under some parameter constellations, agents short a stock with positive expected excess return. The binomial market setting facilitates a straightforward adjustment of risky asset skewness, enabling an analysis of its impact on investment behavior—an aspect that continuous-time frameworks cannot capture.

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Publication Details

Journal
SIAM Journal on Financial Mathematics
Published
2026-09-18
DOI
https://doi.org/10.1137/24m1709091
Primary Topic
Financial Markets and Investment Strategies
Type
article
Field-Weighted Citation Impact
0.00

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article

Predictable Relative Forward Performance Processes: Multi-agent and Mean Field Games for Portfolio Management

Yuwei Wang, Gechun Liang, Moris Simon Strub
SIAM Journal on Financial Mathematics
Financial Markets and Investment Strategies
article

Predictable Relative Forward Performance Processes: Multi-agent and Mean Field Games for Portfolio Management

Yuwei Wang, Gechun Liang, Moris Simon Strub
article en

Abstract

Abstract. We introduce predictable relative forward performance processes (PRFPP) as a new framework for studying portfolio management within a competitive and incomplete market environment. Each agent trades a distinct stock following a binomial distribution with probabilities for a positive return depending on the market regime characterized by a nontraded stochastic factor. For both the finite population and mean field games, we construct and analyse PRFPPs for initial data of the CARA class along with the associated equilibrium strategies. We find that relative performance concerns do not necessarily lead to more investment in the risky asset compared to when there are no such concerns. Under some parameter constellations, agents short a stock with positive expected excess return. The binomial market setting facilitates a straightforward adjustment of risky asset skewness, enabling an analysis of its impact on investment behavior—an aspect that continuous-time frameworks cannot capture.

SIAM Journal on Financial MathematicsVol. 17(3)
Shanghai University of Finance and Economics (CN), University of Warwick (GB)
City University of Hong Kong, National Natural Science Foundation of China, Basic and Applied Basic Research Foundation of Guangdong Province
Openalex Percentile: Top 99%
Financial Markets and Investment Strategies
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