Dynkin games with heterogeneous beliefs

Marta Leniec, Kristoffer Glover and Erik Ekström
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Marta Leniec: Uppsala University
Erik Ekström: Uppsala University

Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: We study zero-sum optimal stopping games (Dynkin games) between two players who disagree about the underlying model. In a Markovian setting, a verification result is established showing that if a pair of functions can be found that satisfies some natural conditions then a Nash equilibrium of stopping times is obtained, with the given functions as the corresponding value functions. In general, however, there is no uniqueness of Nash equilibria, and different equilibria give rise to different value functions. As an example, we provide a thorough study of the game version of the American call option under heterogeneous beliefs. Finally, we also study equilibria in randomized stopping times.

Keywords: Dynkin game; heterogeneous belief; multiple Nash equilibria; optimal stopping theory (search for similar items in EconPapers)
Pages: 16 pages
Date: 2017-01-01
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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Citations: View citations in EconPapers (6)

Published in: Ekstrom, E., Glover, K. and Leniec, M., 2017, "Dynkin games with heterogeneous beliefs", Journal of Applied Probability, 54(1), 236-251.

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