Francesco Musolino

A coopetitive approach to financial markets stabilization and risk management

The aim of this paper is to propose a methodology to stabilize the financial markets by adopting Game Theory, in particular, the Complete Study of a Differentiable Game and the new mathematical model of Coopetitive Game, proposed recently in the literature by D. Carfi. Specifically, we will focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose we will discuss about an interaction between the two above economic subjects: the Enterprise, our first player, and the Financial Institute, our second player. The only solution which allows both players to win something, and therefore the only one collectively desirable, is represented by an agreement between the two subjects: the Enterprise artificially causes an inconsistency between spot and future markets, and the Financial Institute, who was unable to make arbitrages alone, because of the introduction by the normative authority of a tax on economic transactions (that we propose to stabilize the financial market, in order to protect it from speculations), takes the opportunity to win the maximum possible collective (social) sum, which later will be divided with the Enterprise by contract. We propose hereunder two kinds of agreement: a fair transferable utility agreement on the an initial natural interaction and a same type of compromise on a quite extended coopetitive context.

MODEL OF POSSIBLE COOPERATION IN FINANCIAL MARKETS IN PRESENCE OF TAX ON SPECULATIVE TRANSACTIONS

In this paper, we propose an economic and mathematical model to protect the financial markets from speculative attacks, by introducing a tax on financial speculative transactions. By using Game Theory, we focus on the interaction between two general players: a real economic subject (we call Enterprise) acting with hedging scopes and a bank (we call Financial Institute) acting with speculative purposes. We find different equilibria of our game, by considering friendly, selfless, selfish, fearful or aggressive behavior of players; we note that no equilibrium is good for both players, and each of them prevent at least one of the two economic subjects to obtain profits. So, we propose two different transferable utility solutions, in order to achieve a result satisfying both economic subjects and, at the same time, to achieve a condition promoting the stability of the financial markets in which our two players are interacting.

GAME THEORY FOR SPECULATIVE DERIVATIVES: A POSSIBLE STABILIZING REGULATORY MODEL

The aim of this paper is to propose a methodology to stabilize the financial markets using Game Theory, specifically the Complete Study of a Differentiable Game. Initially, we intend to make a quick discussion of peculiarities and recent development of derivatives, and then we move on to the main topic of the paper: forwards and futures. We illustrate their pricing and the functioning of markets for this particular derivatives type. We also will examine the short or long hedging strategies, used by companies to try to cancel the risk associated with market variables. At this purpose, we present a game theory model. Specifically, we focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose, we discuss about an interaction between the two above economic subjects: the Enterprise, our first player, and the Financial Institute, our second player. We propose a tax on financial transactions with speculative purposes in order to stabilize the financial market, protecting it from speculations. This tax hits only the speculative profits and we find a cooperative solution that allows, however, both players to obtain a gain.

Credit Crunch in the Euro Area: A Coopetitive Multi-agent Solution

The aim of this paper is to propose a methodology to attenuate the plague of the credit crunch, which is very common in this period: despite the banking world having available a huge amount of money, there is no available money in the real economy. Consequently, we want to find a way to allow a global economic recovery by adopting a new mathematical model of “Coopetitive Game.” Specifically, we will focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose, we examine an interaction between the above economic subjects: the Enterprise, our first player, and the Financial Institute, our second player. The solution that allows both players to win the maximum possible collective profit, and therefore the one desirable for both players, is represented by a coopetitive agreement between the two subjects. So the Enterprise artificially causes (also thanks to the money loaned by the Financial Institute that receives them by the ECB) an inconsistency between spot and futures markets, and the Financial Institute takes the opportunity to win the maximum possible collective gain of the coopetitive game (the two players even arrive to the maximum of the game). We propose hereunder two possible transferable utility solutions, in order to avoid that the envy of the Enterprise, which gains a much less advantage from the adoption of a coopetitive strategy, may compromise the success of the interaction.

Preface: Introducing PISRS

Introductory notes on the Special Issue dedicated to the Permanent International Session of Research Seminars (PISRS) held in 2011 at the DESMaS Department of the University of Messina.

Preface: Introducing PISRS (Part II)

Introductory note on the second part of the Special Issue dedicated to the Permanent International Session of Research Seminars (PISRS) held at the DESMaS Department of the University of Messina.