Jean-Pierre Fouque, University of California Santa Barbara, Stochastic Games with Delay: a Toy Model
Park Shops 200Motivated by modeling borrowing and lending between banks, we start by illustrating systemic risk with a toy model of diffusions processes coupled through their drifts. We then show that such a simplistic model is in fact a Nash equilibrium of a Linear-Quadratic differential game. In order to take into account clearing debt obligations a delay…