A Dynkin game on assets with incomplete information on the return

Tiziano De Angelis, Fabien Gensbittel and St\'ephane Villeneuve

Papers from arXiv.org

Abstract: This paper studies a 2-players zero-sum Dynkin game arising from pricing an option on an asset whose rate of return is unknown to both players. Using filtering techniques we first reduce the problem to a zero-sum Dynkin game on a bi-dimensional diffusion $(X,Y)$. Then we characterize the existence of a Nash equilibrium in pure strategies in which each player stops at the hitting time of $(X,Y)$ to a set with moving boundary. A detailed description of the stopping sets for the two players is provided along with global $C^1$ regularity of the value function.

Date: 2017-05, Revised 2019-05
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (2)

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Working Paper: A Dynkin game on assets with incomplete information on the return (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1705.07352

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