Closed‐loop Nash competition for liquidity

DOI10.1111/MAFI.12409arXiv2112.02961OpenAlexW4383737817MaRDI QIDQ6187366FDOQ6187366

Author name not available (Why is that?), Eyal Neuman, Johannes Muhle-Karbe

Publication date: 31 January 2024

Published in: Mathematical Finance (Search for Journal in Brave)

Abstract: We study a multi-player stochastic differential game, where agents interact through their joint price impact on an asset that they trade to exploit a common trading signal. In this context, we prove that a closed-loop Nash equilibrium exists if the price impact parameter is small enough. Compared to the corresponding open-loop Nash equilibrium, both the agents' optimal trading rates and their performance move towards the central-planner solution, in that excessive trading due to lack of coordination is reduced. However, the size of this effect is modest for plausible parameter values.

Full work available at URL: https://arxiv.org/abs/2112.02961

zbMATH Keywords

price impactstochastic gamesclosed-loop Nash equilibrium

Mathematics Subject Classification ID

Applications of game theory (91A80) Financial markets (91G15) Stochastic games, stochastic differential games (91A15)

Cites Work

• Dynamic portfolio choice with frictions
• Price dynamics in a Markovian limit order market
• Mean field games and systemic risk
• Incorporating order-flow into optimal execution
• Lectures on BSDEs, stochastic control, and stochastic differential games with financial applications
• Equilibrium returns with transaction costs
• Mean field game of controls and an application to trade crowding
• Incorporating signals into optimal trading
• Mean field and n‐agent games for optimal investment under relative performance criteria
• On the convergence of closed-loop Nash equilibria to the mean field game limit
• Mean‐field games with differing beliefs for algorithmic trading
• Many-player games of optimal consumption and investment under relative performance criteria
• Convergence of Large Population Games to Mean Field Games with Interaction Through the Controls
• An FBSDE approach to market impact games with stochastic parameters
• Learning about latent dynamic trading demand
• A two-player portfolio tracking game
• Price impact in Nash equilibria

Cited In (1)

• Optimal trading and competition with information in the price impact model

This page was built for publication: Closed‐loop Nash competition for liquidity

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6187366)