Forward Backward Stochastic Differential Equation Games with Delay and Noisy Memory
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.
Keywords
Cite
@article{arxiv.1706.09651,
title = {Forward Backward Stochastic Differential Equation Games with Delay and Noisy Memory},
author = {Kristina Rognlien Dahl},
journal= {arXiv preprint arXiv:1706.09651},
year = {2017}
}
Comments
19 pages