The strategic role of Game Theory in financial markets

This study examines the strategic role of game theory in financial markets through a literature-based analysis. Game theory, as a powerful tool that enables the mathematical analysis of rational decision-makers’ strategic interactions, provides significant contributions to understanding key processes such as competition, cooperation, arbitrage, pricing, speculation, and manipulation in financial markets. The study first explains the fundamental concepts of game theory (players, strategies, payoffs, and equilibrium points) and emphasizes the critical importance of the Nash equilibrium and its extensions in market analyses. Within the context of financial markets, different types of markets—such as money markets, capital markets, organized and over-the-counter markets—are examined, and the integration of game theory into strategic decision-making processes is discussed. The literature reveals that game theory has broad applications in areas such as portfolio optimization, risk management, market equilibrium analysis, oligopoly models, and the investigation of speculative bubbles in cryptocurrency markets. In conclusion, game theory emerges not only as a theoretical analytical tool but also as a practical method for understanding the dynamics of financial markets, supporting strategic decision-making processes, and strengthening market stability. In this regard, the study contributes to the theoretical literature while also offering insights for strategic decision-makers in financial markets.