Dynamic Games in Finance

Michèle Breton ()
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Michèle Breton: HEC Montréal

Chapter 19 in Handbook of Dynamic Game Theory, 2018, pp 827-863 from Springer

Abstract: Abstract Finance is a discipline that encompasses all the essential ingredients of dynamic games, through the involvement of investors, managers, and financial intermediaries as players who have competing interests and who interact strategically over time. This chapter presents various applications of dynamic game models used in the broad area of finance, with the objective of illustrating the scope of possibilities in this field. Both corporate and investment finance applications are presented. Topics covered include game options and their use as financial instruments, bankruptcy games and their association with the valuation of debt and equity, and dynamic game models used to explain empirical observations about the financial decisions made by firms, for instance, on capital structure, dividend payments, and investment choices. In each case, the presentation highlights the game’s various ingredients, the choice of the equilibrium concept, and the solution approach used. The chapter’s focus is on the contributions made by dynamic game models to financial theory and practice.

Keywords: Game theory; Finance; Game options; Bankruptcy; Corporate finance; Dynamic games (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-44374-4_23

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DOI: 10.1007/978-3-319-44374-4_23

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