Discussion Papers 2022

CIRJE-F-1198

"Multi-agent Robust Optimal Investment Problem in Incomplete Market"

Author Name

Kizaki, Keisuke, Taiga Saito, Akihiko Takahashi

Date

September 2022

Full Paper PDF file
Remarks

Revised in November 2022

Abstract

This paper considers a multi-agent optimal investment problem with conservative sentiments in an incomplete market by a BSDE approach. Particularly, we formulate the conservative sentiments of the agents by a sup-inf/inf-sup problem where we take infimum on a choice of a probability measure and supremum on trading strategies. To the best of our knowledge, this is the first attempt to investigate a multi-agent equilibrium model in an incomplete setting with heterogeneous views on Brownian motions. Moreover, we show two cases where the trading strategies and the excess return process of the risky asset in equilibrium are explicitly solved. Finally, we present numerical examples of the trading strategies and the expected return process in equilibrium under conservative sentiments, which explain how the sentiments affect the trading strategies of the agents and the expected return process of the risky asset.

Keywords: Multi-agent system, robust control, portfolio optimization, financial application