Abstract
Copyright: © 2012 Teng J. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Since the 1980s, there has been an increasing use of games theory in the field of finance, including stock and forex trading [1]. The standard assumption of perfect competition was challenged. Analysis with the assumption of strategic interactions which uses games theory implicitly or explicitly becomes more popular. The use of games theory in the field of finance brings many new insights and should definitely be encouraged. But it also means that finance specialists need to be familiar with a new field of knowledge. Furthermore, one should also caution that games theory itself is a relatively new field and many of the game theoretic solution concepts are still being researched, refined and revised, and are not without controversy.
Highlights
Since the 1980s, there has been an increasing use of games theory in the field of finance, including stock and forex trading [1]
One should caution that games theory itself is a relatively new field and many of the game theoretic solution concepts are still being researched, refined and revised, and are not without controversy
I would like to give an example of a paper that relies on the use of a controversial game theoretic concept
Summary
Since the 1980s, there has been an increasing use of games theory in the field of finance, including stock and forex trading [1]. The use of games theory in the field of finance brings many new insights and should definitely be encouraged. The paper models the strategic interactions between a stock market manipulator and the National Securities Commission, the regulatory authority. It is a complete information simultaneous game. There is a unique mixed strategy equilibrium in which both the manipulator and the National Securities Commission randomizes. While the results are interesting, further examination reveals certain anomalies that are common to models involving the use of mixed strategy equilibrium
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