Order Book, Financial Markets and Self-Organized Criticality
Trading and Market Microstructure
2016-02-29 v1 Physics and Society
Abstract
We present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining trading decisions, while fruitfully replicates typical aggregate market behavior as the "self-fulfilling prophecy". We also address the role of random traders as a possible decentralized solution to dampen market fluctuations.
Keywords
Cite
@article{arxiv.1602.08270,
title = {Order Book, Financial Markets and Self-Organized Criticality},
author = {Alessio Emanuele Biondo and Alessandro Pluchino and Andrea Rapisarda},
journal= {arXiv preprint arXiv:1602.08270},
year = {2016}
}
Comments
18 pages, 10 figures