2020/04/02 by David Evangelista, Evangelista, David, Yuri Thamsten +1
Economics, Econometrics and Finance · Mathematics · #91A06 #91A15 #91A80 #93E20 #Economic theories and models #FOS: Economics and business #Mathematical Biology Tumor Growth #Mathematical Finance (q-fin.MF) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2004.00790
openalex publication_date 2020/04/02 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We investigate stochastic differential games of optimal trading comprising a finite population. There are market frictions in the present framework, which take the form of stochastic permanent and temporary price impacts. Moreover, information is asymmetric among the traders, with mild assumptions. For constant market parameters, we provide specialized results. Each player selects her parameters based not only on her informational level but also on her particular preferences. The first part of the work is where we examine the unconstrained problem, in which traders do not necessarily have to reach the end of the horizon with vanishing inventory. In the sequel, we proceed to analyze the constrained situation as an asymptotic limit of the previous one. We prove the existence and uniqueness of a Nash equilibrium in both frameworks, alongside a characterization, under suitable assumptions. We conclude the paper by presenting an extension of the basic model to a hierarchical market, for which we establish the existence, uniqueness, and characterization of a Stackelberg-Nash equilibrium.