Applications of Mean Field Games in Financial Engineering and Economic Theory

TL;DR

This paper reviews and extends the application of Mean Field Games in finance and economics, highlighting recent developments and new models in financial engineering and economic theory.

Contribution

It provides an updated overview of Mean Field Game applications, including new models in bitcoin mining, energy markets, macro-economics, and contract theory.

Findings

New models for bitcoin mining and energy markets.

Models bridging macro-economics and finance.

Applications in contract theory.

Abstract

This is an expanded version of the lecture given at the AMS Short Course on Mean Field Games, on January 13, 2020 in Denver CO. The assignment was to discuss applications of Mean Field Games in finance and economics. I need to admit upfront that several of the examples reviewed in this chapter were already discussed in book form. Still, they are here accompanied with discussions of, and references to, works which appeared over the last three years. Moreover, several completely new sections are added to show how recent developments in financial engineering and economics can benefit from being viewed through the lens of the Mean Field Game paradigm. The new financial engineering applications deal with bitcoin mining and the energy markets, while the new economic applications concern models offering a smooth transition between macro-economics and finance, and contract theory.