Summary:
This master thesis, presents some indicative applications of Game Theory in the field of investments and more precisely in the field of Stock Markets. The essay consists of five chapters. The first one (introduction), briefly presents both the main aspects of Game Theory (basic concepts, definitions, categories, …) and the main principles that rule a Stock Market (entities involved, objectives of the main participants, ..).
In the following two chapters (2nd and 3rd), I present two examples of investing decision taking, depending on the model that best describes the stock market. In the first case, both the market and the rules that define it are described as a special kind of game, namely game against nature. In this example, one entity (the market) aims to cause to all other entities of the market (all investors) the maximum possible losses, through the stock market fluctuations. In the second case, the market is considered as a set of investors that compete each other for maximizing their profits. As this game is a zero-sum game, the profit of one investor is the loss of another.
Then, in the next chapter, a zero-sum, mixed strategy game is presented where the stock market regulators investigate the cases of possible market abuse (manipulation of a stock price) by an investor (or a group of investors). Finally, in the last chapter some conclusions are made and other applications of gaming theory are briefly mentioned.
