Forward Backward Stochastic Differential Equation Games with Delay and Noisy Memory

Kristina Rognlien Dahl

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arXiv · 1706.09651

Forward Backward Stochastic Differential Equation Games with Delay and Noisy Memory

Kristina Rognlien Dahl

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Abstract

The main goal of this paper is to study a stochastic game connected to a system of forward backward stochastic differential equations (FBSDEs) involving delay and so-called noisy memory. We derive suffcient and necessary maximum principles for a set of controls for the players to be a Nash equilibrium in such a game. Furthermore, we study a corresponding FBSDE involving Malliavin derivatives, which (to the best of our knowledge) is a kind of equation which has not been studied before. The maximum principles give conditions for determining the Nash equilibrium of the game. We use this to derive a closed form Nash equilibrium for a specifc model in economics where the players aim to maximize their consumption with respect recursive utility.

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BibTeX RIS

Kristina Rognlien Dahl. 2017-06-29. Forward Backward Stochastic Differential Equation Games with Delay and Noisy Memory. https://arxiv.org/abs/1706.09651

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