Nonzero-sum stochastic differential games with impulse controls: a verification theorem with applications

SEMINARIO DI FINANZA QUANTITATIVA

Classe di Scienze Matematiche e Naturali
Giovedì, 15 Febbraio 2018
Ore 11:00
Luciano Campi (London School of Economics)

Abstract

We consider a general nonzero-sum impulse game with two players. The main mathematical contribution of the paper is a verification theorem which provides, under some regularity conditions, a suitable system of quasi-variational inequalities for the value functions and the optimal strategies of the two players. As an application, we study an impulse game with a one-dimensional state variable, following a real-valued scaled Brownian motion, and two players with linear and symmetric running payoffs. We fully characterize a Nash equilibrium and provide explicit expressions for the optimal strategies and the value functions. We also prove some asymptotic results with respect to the intervention costs. Finally, we consider two further non-symmetric examples where a Nash equilibrium is found numerically.