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arXiv · 2402.07698

Optimal consumption and investment under relative performance criteria with Epstein-Zin utility

Jodi Dianetti·Frank Riedel·Lorenzo Stanca
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Abstract

We consider the strategic interaction of traders in a continuous-time financial market with Epstein-Zin-type recursive intertemporal preferences and performance concerns. We derive explicitly an equilibrium for the finite player and the mean-field version of the game, based on a study of geometric backward stochastic differential equations of Bernoulli type that describe the best replies of traders. Our results show that Epstein-Zin preferences can lead to substantially different equilibrium behavior.

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Jodi Dianetti, Frank Riedel, Lorenzo Stanca. 2024-02-12. Optimal consumption and investment under relative performance criteria with Epstein-Zin utility. https://arxiv.org/abs/2402.07698

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