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Keywords = inter-bank borrowing and lending

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17 pages, 417 KiB  
Article
Mean Field Game with Delay: A Toy Model
by Jean-Pierre Fouque and Zhaoyu Zhang
Risks 2018, 6(3), 90; https://doi.org/10.3390/risks6030090 - 1 Sep 2018
Cited by 6 | Viewed by 3611
Abstract
We study a toy model of linear-quadratic mean field game with delay. We “lift” the delayed dynamic into an infinite dimensional space, and recast the mean field game system which is made of a forward Kolmogorov equation and a backward Hamilton-Jacobi-Bellman equation. We [...] Read more.
We study a toy model of linear-quadratic mean field game with delay. We “lift” the delayed dynamic into an infinite dimensional space, and recast the mean field game system which is made of a forward Kolmogorov equation and a backward Hamilton-Jacobi-Bellman equation. We identify the corresponding master equation. A solution to this master equation is computed, and we show that it provides an approximation to a Nash equilibrium of the finite player game. Full article
(This article belongs to the Special Issue Systemic Risk in Finance and Insurance)
18 pages, 876 KiB  
Article
An Agent-Based Approach to Interbank Market Lending Decisions and Risk Implications
by Anqi Liu, Cheuk Yin Jeffrey Mo, Mark E. Paddrik and Steve Y. Yang
Information 2018, 9(6), 132; https://doi.org/10.3390/info9060132 - 29 May 2018
Cited by 11 | Viewed by 7219
Abstract
In this study, we examine the relationship of bank level lending and borrowing decisions and the risk preferences on the dynamics of the interbank lending market. We develop an agent-based model that incorporates individual bank decisions using the temporal difference reinforcement learning algorithm [...] Read more.
In this study, we examine the relationship of bank level lending and borrowing decisions and the risk preferences on the dynamics of the interbank lending market. We develop an agent-based model that incorporates individual bank decisions using the temporal difference reinforcement learning algorithm with empirical data of 6600 U.S. banks. The model can successfully replicate the key characteristics of interbank lending and borrowing relationships documented in the recent literature. A key finding of this study is that risk preferences at the individual bank level can lead to unique interbank market structures that are suggestive of the capacity with which the market responds to surprising shocks. Full article
(This article belongs to the Special Issue Agent-Based Artificial Markets)
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