A Multi-Player Game-Theoretic Approach to Modeling the Global Capital Markets

摘要

Ever since the Financial Crisis of 2008, many hedge funds and other high-profile money managers have complained that their investment approaches and algorithms stopped working due to the extraordinary monetary stimulus introduced by the Federal Reserve Board and other major central banks in response to the Financial Crisis, leading to sub-par investment returns. This extraordinary stimulus produced by the world's major central banks helped to create multi-trillion-dollar central bank asset balances on their balance sheets, resulting in over one-third of the world's government bonds yielding negative rates by the summer of 2016, conditions that are unprecedented. To invest successfully going forward, it will be imperative to understand just how this unprecedented stimulus has affected and distorted market prices of the major global asset classes. Without historical precedent, looking back through history will not provide sufficient insight to truly understand global capital market behavior post-Financial Crisis. Instead, a forward-looking methodology, multi-player game theory, has been explored and applied to provide a more relevant perspective on market behavior going forward.