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Mean Field Game of Optimal Relative Investment with Jump Risk

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  • Lijun Bo
  • Shihua Wang
  • Xiang Yu

Abstract

This paper studies the n-player game and the mean field game under the CRRA relative performance on terminal wealth, in which the interaction occurs by peer competition. In the model with n agents, the price dynamics of underlying risky assets depend on a common noise and contagious jump risk modelled by a multi-dimensional nonlinear Hawkes process. With a continuum of agents, we formulate the MFG problem and characterize a deterministic mean field equilibrium in an analytical form under some conditions, allowing us to investigate some impacts of model parameters in the limiting model and discuss some financial implications. Moreover, based on the mean field equilibrium, we construct an approximate Nash equilibrium for the n-player game when n is sufficiently large. The explicit order of the approximation error is also derived.

Suggested Citation

  • Lijun Bo & Shihua Wang & Xiang Yu, 2021. "Mean Field Game of Optimal Relative Investment with Jump Risk," Papers 2108.00799, arXiv.org, revised Feb 2023.
    • Handle: RePEc:arx:papers:2108.00799
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    References listed on IDEAS

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    Cited by:

    1. Zongxia Liang & Keyu Zhang, 2023. "Time-inconsistent mean field and n-agent games under relative performance criteria," Papers 2312.14437, arXiv.org, revised Apr 2024.
    2. Lijun Bo & Shihua Wang & Xiang Yu, 2022. "A mean field game approach to equilibrium consumption under external habit formation," Papers 2206.13341, arXiv.org, revised Mar 2024.

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