Game Theory for Networks. 2nd International ICST Conference, GAMENETS 2011, Shanghai, China, April 16-18, 2011, Revised Selected Papers

Research Article

Multi-portfolio Optimization: A Potential Game Approach

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  • @INPROCEEDINGS{10.1007/978-3-642-30373-9_13,
        author={Yang Yang and Francisco Rubio and Gesualdo Scutari and Daniel Palomar},
        title={Multi-portfolio Optimization: A Potential Game Approach},
        proceedings={Game Theory for Networks. 2nd International ICST Conference, GAMENETS 2011, Shanghai, China, April 16-18, 2011, Revised Selected Papers},
        proceedings_a={GAMENETS},
        year={2012},
        month={10},
        keywords={},
        doi={10.1007/978-3-642-30373-9_13}
    }
    
  • Yang Yang
    Francisco Rubio
    Gesualdo Scutari
    Daniel Palomar
    Year: 2012
    Multi-portfolio Optimization: A Potential Game Approach
    GAMENETS
    Springer
    DOI: 10.1007/978-3-642-30373-9_13
Yang Yang1,*, Francisco Rubio1,*, Gesualdo Scutari2,*, Daniel Palomar1,*
  • 1: The Hong Kong University of Science and Technology
  • 2: State University of New York (SUNY)
*Contact email: yangyang@ust.hk, eerubio@ust.hk, gesualdo@buffalo.edu, palomar@ust.hk

Abstract

Trades from separately managed accounts are usually pooled together for execution and the transaction cost for a given account may depend on the overall level of trading. Multi-portfolio optimization is a technique for combing multiple accounts at the same time, considering their joint effects while adhering to account-specific constraints. In this paper, we model multi-portfolio optimization as a game problem and adopt as a desirable objective the concept of Nash Equilibrium (NE). By formulating the game problem as a potential game, we are able to provide a complete characterization of NE and derive iterative algorithms with a distributed nature and satisfactory convergence property.