We consider a mean field game describing the limit of a stochastic differential game of -players whose state dynamics are subject to idiosyncratic and common noise and that can be absorbed when they hit a prescribed region of the state space. We provide a general result for the existence of weak mean field equilibria which, due to the absorption and the common noise, are given by random flow of sub-probabilities. We first use a fixed point argument to find solutions to the mean field problem in a reduced setting resulting from a discretization procedure and then we prove convergence of such equilibria to the desired solution. We exploit these ideas also to construct ɛ-Nash equilibria for the -player game. Since the approximation is two-fold, one given by the mean field limit and one given by the discretization, some suitable convergence results are needed. We also introduce and discuss a novel model of bank run that can be studied within this framework.

Mean field games with absorption and common noise with a model of bank run / M. Burzoni, L. Campi. - In: STOCHASTIC PROCESSES AND THEIR APPLICATIONS. - ISSN 0304-4149. - 164:(2023 Oct), pp. 206-241. [10.1016/j.spa.2023.07.007]

Mean field games with absorption and common noise with a model of bank run

M. Burzoni;L. Campi
2023

Abstract

We consider a mean field game describing the limit of a stochastic differential game of -players whose state dynamics are subject to idiosyncratic and common noise and that can be absorbed when they hit a prescribed region of the state space. We provide a general result for the existence of weak mean field equilibria which, due to the absorption and the common noise, are given by random flow of sub-probabilities. We first use a fixed point argument to find solutions to the mean field problem in a reduced setting resulting from a discretization procedure and then we prove convergence of such equilibria to the desired solution. We exploit these ideas also to construct ɛ-Nash equilibria for the -player game. Since the approximation is two-fold, one given by the mean field limit and one given by the discretization, some suitable convergence results are needed. We also introduce and discuss a novel model of bank run that can be studied within this framework.
Mean field games; Bank runs; Common noise; Absorbing boundary; Nash equilibria
Settore MAT/06 - Probabilita' e Statistica Matematica
Settore SECS-S/06 - Metodi mat. dell'economia e Scienze Attuariali e Finanziarie
Settore MATH-03/B - Probabilità e statistica matematica
Settore STAT-04/A - Metodi matematici dell'economia e delle scienze attuariali e finanziarie
ott-2023
17-lug-2023
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/987710
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