Title: A new class of decentralized portfolio optimization problems for risk diffusion
Authors: Nessah Rabia - IESEG School of Management (France) [presenting]
Stefano Nasini - IESEG School of Management (France)
Francisco Benita - Singapore University of Technology and Design (France)
Abstract: In the context of risk management, a decentralized investment problem for risk minimization in multiple markets is modeled, where a single investor delegates the portfolio decisions to risk-minimizers intermediaries. The general optimization problem consists of a single-leader multi-follower game, whose numerical solution is addressed by taking advantage of uncovered properties of the risk diffusion measurements. We show that under mild assumptions, this problem can be reformulated as a non-linear knapsack problem. We numerically assess the property of the solution using large-scale stock returns data from U.S. listed enterprises.