A Dynkin game on assets with incomplete information on the return

Tiziano de Angelis, Fabien Gensbittel and Stéphane Villeneuve
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Tiziano de Angelis: UNITO - Università degli studi di Torino = University of Turin
Stéphane Villeneuve: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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 C1 regularity of the value function.

Date: 2020
New Economics Papers: this item is included in nep-gth
Note: View the original document on HAL open archive server: https://hal.science/hal-03142523v1
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Citations: View citations in EconPapers (1)

Published in Mathematics of Operations Research, 2020, 46 (1), ⟨10.1287/moor.2019.1046⟩

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Working Paper: A Dynkin game on assets with incomplete information on the return (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03142523

DOI: 10.1287/moor.2019.1046

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