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Equilibrium selection for multi-portfolio optimization

Author

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

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.

Suggested Citation

  • Lampariello, Lorenzo & Neumann, Christoph & Ricci, Jacopo M. & Sagratella, Simone & Stein, Oliver, 2021. "Equilibrium selection for multi-portfolio optimization," European Journal of Operational Research, Elsevier, vol. 295(1), pages 363-373.
    • Handle: RePEc:eee:ejores:v:295:y:2021:i:1:p:363-373
    DOI: 10.1016/j.ejor.2021.02.033
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    Cited by:

    1. Francesco Cesarone & Lorenzo Lampariello & Davide Merolla & Jacopo Maria Ricci & Simone Sagratella & Valerio Giuseppe Sasso, 2023. "A bilevel approach to ESG multi-portfolio selection," Computational Management Science, Springer, vol. 20(1), pages 1-23, December.
    2. Nguyen, Hoang Nam & Lisser, Abdel & Singh, Vikas Vikram, 2024. "Random games under normal mean–variance mixture distributed independent linear joint chance constraints," Statistics & Probability Letters, Elsevier, vol. 208(C).
    3. Giancarlo Bigi & Lorenzo Lampariello & Simone Sagratella & Valerio Giuseppe Sasso, 2023. "Approximate variational inequalities and equilibria," Computational Management Science, Springer, vol. 20(1), pages 1-16, December.
    4. Shen Peng & Navnit Yadav & Abdel Lisser & Vikas Vikram Singh, 2021. "Chance-constrained games with mixture distributions," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 94(1), pages 71-97, August.
    5. Lorenzo Lampariello & Gianluca Priori & Simone Sagratella, 2022. "On the solution of monotone nested variational inequalities," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 96(3), pages 421-446, December.

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