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Dynamic Games in Finance

  • Michèle Breton
Reference work entry

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 

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.HEC MontréalMontréalCanada

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