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Evolutionary Finance and Dynamic Games

Author

Listed:
  • Rabah AMIR

    (University of Arizona)

  • Igor V. EVSTIGNEEV

    (University of Manchester)

  • Thorsten HENS

    (University of Zurich and Swiss Finance Institute)

  • Le XU

    (University of Manchester)

Abstract

The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially rein- vested. The investors use general, adaptive strategies (portfo- lio rules), distributing their wealth between assets, depending on the exogenous states of the world and the observed history of the game. The main goal is to identify strategies, allowing an investor to survive, i.e. to possess a positive, bounded away from zero, share of market wealth over the whole infinite time horizon. This work brings together recent studies on evolutionary finance with the classical topic of non-cooperative market games.

Suggested Citation

  • Rabah AMIR & Igor V. EVSTIGNEEV & Thorsten HENS & Le XU, 2009. "Evolutionary Finance and Dynamic Games," Swiss Finance Institute Research Paper Series 09-49, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp0949
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    File URL: http://ssrn.com/abstract=1536724
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    Citations

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    Cited by:

    1. Zakamulin, Valeriy & Hunnes, John A., 2021. "Stock earnings and bond yields in the US 1871–2017: The story of a changing relationship," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 182-197.
    2. Cvitanic Jaksa & Malamud Semyon, 2010. "Relative Extinction of Heterogeneous Agents," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-23, February.
    3. Dindo, Pietro, 2019. "Survival in speculative markets," Journal of Economic Theory, Elsevier, vol. 181(C), pages 1-43.
    4. W. Bahsoun & I. Evstigneev & L. Xu, 2011. "Almost sure Nash equilibrium strategies in evolutionary models of asset markets," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 73(2), pages 235-250, April.
    5. Bottazzi, Giulio & Dindo, Pietro, 2022. "Drift criteria for persistence of discrete stochastic processes on the line," Journal of Mathematical Economics, Elsevier, vol. 101(C).

    More about this item

    Keywords

    evolutionary finance; dynamic games; stochastic games; survival strategies;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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