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          Department of Systems Engineering and Engineering Management

 

 

 

                                  The Chinese University of Hong Kong

 

 

 

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Date: Tuesday, June 9, 2026, 11:00am to 12:00pm HKT

 

Venue: ERB513, The Chinese University of Hong Kong

 

Title: Nonzero-Sum Dynkin Games: Response Equilibria and Applications to Convertible Bonds

 

Speaker: Dr. Gechun Liang, University of Warwick

 

 

Abstract:

 

We study continuous-time two-player nonzero-sum Dynkin games, focusing on settings where the classical order condition, under which each player prefers the opponent to stop first, does not hold. This departure from the standard framework captures richer strategic interactions, including both war of attrition and preemption effects. In this regime, multiple Nash equilibria may arise and the classical double smooth-fit principle can fail. To address these challenges, we introduce a new equilibrium concept in which players adopt strategies with the opportunity to respond (SWOR) to their opponent’s stopping decisions. This formulation captures priority and timing effects absent from the classical model and is naturally motivated by applications such as convertible bonds, where investors and issuers interact through conversion and bankruptcy decisions, with the investor granted an additional opportunity to respond when the issuer declares bankruptcy. We solve the problem via the geometric concave majorant method of Dayanik-Karatzas, leading to explicit characterisations of equilibrium value functions and stopping regions. Finally, we present two convertible bond examples illustrating how response opportunities affect equilibrium outcomes and optimal stopping behaviour, and how the interplay between preemption and attrition shapes equilibrium outcomes. Joint work with David Hobson and Edward Wang.

 

 

 

Biography:

 

Dr. Gechun Liang is a Reader in the Department of Statistics at the University of Warwick. His previous positions include Associate Professor at the University of Warwick, Lecturer at King's College London, and Postdoctoral Research Fellow at the Oxford-Man Institute of Quantitative Finance. From 2018 to 2019, he was honored as a Senior Fellow and Marie Curie Fellow at the Freiburg Institute for Advanced Studies (FRIAS) at the University of Freiburg, Germany. He completed his PhD in Mathematics from the University of Oxford in 2011. His research interests primarily lie in financial mathematics and stochastic control theory. He has published papers in leading journals including Annals of Probability, SIAM Journal on Control and Optimization, Journal of Differential Equations, Finance and Stochastics, Mathematical Finance, and SIAM Journal on Financial Mathematics.

 

 

 

Everyone is welcome to attend the talk!

 

SEEM-5202 Website: http://seminar.se.cuhk.edu.hk