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Robust Non-zero-sum Asset Allocation Games Under Relative Wealth Concerns

Author

Listed:
  • Huainian Zhu

    (School of Economics, Guangdong University of Technology)

  • Sihan Huang

    (School of Economics, Guangdong University of Technology)

  • Ning Bin

    (School of Management, Guangdong University of Technology)

Abstract

This paper considers the non-zero sum stochastic differential asset allocation game problem between two competitive institutional investors, who are concerned with the potential model ambiguity and aim to seek the robust optimal asset allocation strategy. The two investors' decisions influence each other through the investors' relative wealth concerns. By applying the dynamic programming principle, explicit solutions for the robust equilibrium asset allocation strategies are obtained under the representative case of constant relative risk aversion (CRRA) utility. Finally, we provide some numerical studies and draw some economic interpretations.

Suggested Citation

  • Huainian Zhu & Sihan Huang & Ning Bin, 2025. "Robust Non-zero-sum Asset Allocation Games Under Relative Wealth Concerns," Annals of Economics and Finance, Society for AEF, vol. 26(1), pages 415-441, May.
    • Handle: RePEc:cuf:journl:y:2025:v:26:i:1:zhuhuangbin
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    More about this item

    Keywords

    Robust non-zero-sum game; Asset allocation; Ambiguity; Nash equilibrium; Hamilton-Jacobi-Bellman-Isaacs (HJBI) equation;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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