In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact in a multi-player framework by introducing strategic...

In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact in a multi-player framework by introducing strategic...

The rational expectations equilibrium has been criticized as an equilibrium concept in market game environments. Such an equilibrium may not exist generically, or it may introduce unrealistic assumptions about an economic agent's knowledge or computational ability. We define a rational...

The rational expectations equilibrium has been criticized as an equilibrium concept in market game environments. Such an equilibrium may not exist generically, or it may introduce unrealistic assumptions about an economic agent's knowledge or computational ability. We define a rational...

Algorithmic trading strategies for execution often focus on the individual agent who is liquidating/acquiring shares. When generalized to multiple agents, the resulting stochastic game is notoriously difficult to solve in closed-form. Here, we circumvent the difficulties by investigating a...

We solve and test experimentally a global-games model of speculative attacks where agents can choose whether to read, at a cost, a payoff irrelevant (sunspot) announcement. Assuming that subjects exogenously believe some others to follow sunspots, we provide conditions for a unique equilibrium...

We adapt a deterministic game theoretic framework in discrete time to super-hedge pricing contingent claims (CCs). The key aspect of this framework is that the worst-case scenario dictates the super-hedging price which protects counter-parties in financial contracts from insolvencies. A general...

This article presents structural asset pricing model with stochastic interest rate and default barrier based on the evolution of the firm' Earning Before Interest and Taxes (EBIT). This framework is further enhanced by the game theory analysis which examines the negotiation between shareholders...

We analyze the real option signaling game models of debt financing of a risky project under information asymmetry, where the firm quality is only known to the firm management but not outsiders. The firm decides on the optimal investment timing of the risky project that requires upfront fixed...

Tuning one's shower in some hotels may turn into a challenging coordination game with imperfect information. The temperature sensitivity increases with the number of agents, making the problem possibly unlearnable. Because there is in practice a finite number of possible tap positions, identical...