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.
Authors
- Yuwei Wang (ORCID: https://orcid.org/0000-0002-7827-6993)
- Gechun Liang (ORCID: https://orcid.org/0000-0003-0752-0773)
- Moris Simon Strub (ORCID: https://orcid.org/0000-0002-6303-6700)
Institutions
- Shanghai University of Finance and Economics (CN)
- University of Warwick (GB)
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
Funders
- City University of Hong Kong
- National Natural Science Foundation of China
- Basic and Applied Basic Research Foundation of Guangdong Province