An Informational Introduction to Game Theory and the Stock Market

It has been a while since I wrote an article. I therefore owe you, my readers, a sincere apology. With the ever looming lockdown coming for Kuwait in February 2021, I decided to take a deep breath from university studying — to pause, reflect, and continue writing once again.

An interesting subject I’ve recently came across was ‘Game Theory’, and therefore I’ve selected it as the first article to once again revive the streak of article writing in 2021. As you probably already know, every topic I come across, I tend to find a way to link it to the financial industry — as mathematical finance seems as of yet, to be my calling.

Let’s begin —

What is Game Theory?

The word game appears with a few definitions in a limited set of contexts. The one we are immediately interested in is the one directly associated with it.

A game in game theory is any interaction between multiple people in which each players payoff is affected by the decisions of others.

The key word here is decisions. At the end of the day every move is governed ultimately by a taken decision. And a game is nothing but a decision making situation broken down further into smaller decision making situations.