Mean Field Games Approach to Systemic Risk
Programme
Title: Mean Field Games Approach to Systemic Risk
Prof. Nizar Touzi (New York University)
Abstract:
Connections between economic agents are desirable for risk diversification purposes. However, they may also be responsible for default contagion, a major concern at the heart of the financial stability of the system. We develop a model of system connection based on the strategic interaction between economic agents. We solve explicitly the mean field limit of the problem in the case of uncorrelated idiosyncratic risks, and we provide a quasi explicit solution of the mean field game. This allows to provide an approximate Nash equilibrium for the finite population problem. We also solve the case of correlated idiosyncratic risk through some common factor by analyzing an appropriate notion of no arbitrage in this context.
About the Speaker
Nizar Touzi is a Professor at New York University, Chair of the Department of Finance and Risk Engineering at the Tandon School of Engineering. He was previously Professor at Department of Applied Mathematics of Ecole Polytechnique in France from 2006 to 2023. He was an invited session speaker at the International Congress of Mathematicians (Hyderabad 2010). He received the Louis Bachelier Natixis prize of the French Academy of Sciences in 2012, the Paris Europlace prize of Best Young Researcher in Finance in 2007, and he was awarded an Advanced ERC grant 2012-2017. He is co-editor and associate editor in various international journals in the fields of financial mathematics, applied probability, and control theory.
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