Applying Game Options in a Loan Exit Model

摘要

This study explores market exit decisions of financial institutions into a duopolistic loan in the evaluation concept. A game options approach is used to analyze how uncertainty influences loan decisions. Suppose that the loan market only contains two financial institutions (the leader and follower), and these two roles can be chosen freely. The financial effect for outside shock follows the Poisson downward jump process, and the leader and follower exit the thresholds and are compared to the loan market in the continuous time diffusion process. This study obtains the following results: In the exiting model, the exit costs for the leader are influenced by those of the follower. If the ratio of the leader to follower exit costs is stable, the first-in-first-out or last-in-first-out optimal evaluation models are derived during two financial institutions exiting the loan market.