Game-theoretic Modeling of Market Participants' Behavior: Case of Russian Adjustable-Rate Bonds with Puts

Vitaly L. Okulov; Polina S. Zhilina

doi:10.21638/11701/spbu31.2020.19

Authors

Vitaly L. Okulov Saint Petersburg State University
Polina S. Zhilina Saint Petersburg State University

DOI:

https://doi.org/10.21638/11701/spbu31.2020.19

Abstract

Adjustable-Rate Bonds with Puts (ARBP), frequently issued by the Russian companies, give the issuer the right to arbitrarily change the coupon payments on the bonds at certain moments. But at these moments, the investor has the right to force the issuer to redeem the bonds at a face value. These reciprocal actions of the issuer and investors can be considered as a dynamic game. We suggest a game-theoretic model that allow to determine the optimal decisions of the players. These decisions are compared with empirical data.

Keywords:

dynamic game, optimal decisions, Russian bond market, Adjustable-Rate Bonds with Puts

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