Arbitrage-free pricing of multi-person game claims in discrete time

DOI10.1007/S00780-016-0315-1MaRDI QIDQ503392zbMATH OpenOpenAlexFDO

Authors Ivan Guo, Marek Rutkowski

Publication date 12 January 2017

Published in Finance and Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1405.2718

zbMATH Keywords

stopping timesoptimal equilibriumarbitrage-free pricingmulti-person games

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Martingales with discrete parameter (60G42) Stopping times; optimal stopping problems; gambling theory (60G40) (n)-person games, (n>2) (91A06)

Abstract: We introduce a class of financial contracts involving several parties by extending the notion of a two-person game option (see Kifer (2000)) to a contract in which an arbitrary number of parties is involved and each of them is allowed to make a wide array of decisions at any time, not restricted to simply `exercising the option'. The collection of decisions by all parties then determines the contract's settlement date as well as the terminal payoff for each party. We provide sufficient conditions under which a multi-person game option has a unique arbitrage price, which is additive with respect to any partition of the contract.

Recommendations

• Game contingent claims in complete and incomplete markets
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