Game complete analysis for financial markets stabilization

Carfì, David and Musolino, Francesco (2011): Game complete analysis for financial markets stabilization.

Abstract

The aim of this paper is to propose a methodology to stabilize the financial markets using Game Theory and in particular the Complete Study of a Differentiable Game, introduced in the literature by David Carfì. Specifically, we will focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose we will discuss about an interaction between the two above economic subjects: the Enterprise, our first player, and the Financial Institute, our second player. The only solution which allows both players to win something, and therefore the only one desirable, is represented by an agreement between the two subjects: the Enterprise artificially causes an inconsistency between spot and future markets, and the Financial Institute, who was unable to make arbitrages alone, because of the introduction by the normative authority of a tax on economic transactions (that we propose to stabilize the financial market, in order to protect it from speculations), takes the opportunity to win the maximum possible collective (social) sum, which later will be divided with the Enterprise by contract.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Markets; Game Theory; Stabilization of Financial Markets; arbitrages
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D53 - Financial Markets; N - Economic History > N2 - Financial Markets and Institutions; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G0 - General > G01 - Financial Crises

References

Baglieri D., Carfì D., Dagnino G., (2010), “Profiting from Asymmetric R&D Alliances: Coopetitive Games and Firms’ Strategies”, paper presented at the 4th Workshop on Coopetition Strategy “Coopetition and Innovation”, Montpellier, June 17-18, 2010

Carfì D., 2009, “Payoff space in C1-games”, Applied Sciences (APPS), vol.11, pp. 1-16. http://www.mathem.pub.ro/apps/

Carfì D., 2010, “A Model for Coopetitive Games”, paper presented at Sing6, Palermo, July 6-9 2010

Carfì D., Ricciardello A. 2010, “An Algorithm for Payoff Space in C1-Games”, Atti della Accademia Peloritana dei Pericolanti, Classe di Scienze Fisiche Matematiche e Naturali, Vol. LXXXVIII, n.1, pp. 1-19. http://antonello.unime.it/atti/

John C. Hull, 2009, Options, futures and other derivatives, University of Toronto, cap 3 and 5.