Related papers: Trading Model with Pair Pattern Strategies
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
We study the effect of altruism in two simple asset exchange models: the yard sale model (winner gets a random fraction of the poorer player's wealth) and the theft and fraud model (winner gets a random fraction of the loser's wealth). We…
We propose a minimal theory of non-linear price impact based on a linear (latent) order book approximation, inspired by diffusion-reaction models and general arguments. Our framework allows one to compute the average price trajectory in the…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
Models of auctions or tendering processes are introduced. In every round of bidding the players select their bid from a probability distribution and whenever a bid is unsuccessful, it is discarded and replaced. For simple models, the…
A simple Ising spin model which can describe the mechanism of price formation in financial markets is proposed. In contrast to other agent-based models, the influence does not flow inward from the surrounding neighbors to the center site,…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
We develop a framework for stochastic portfolio theory (SPT), which incorporates modern nonlinear price impact and impact decay models. Our main result is the derivation of the celebrated master formula for additive functional generation of…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…
We point out some major drawbacks in random trading market models and propose a realistic modification which overcomes such drawbacks through `sensible trading'. We apply such trading policy in different situations: a) Agents with zero…
In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
This paper studies stochastic mechanisms under which light-tailed latent price dynamics yield realized prices with power-law tails. The realized price is modeled as $P_T=e^{X_T}$, where $X$ is a Markov-modulated L\'evy process and $T$ is…
The potential of machine learning to automate and control nonlinear, complex systems is well established. These same techniques have always presented potential for use in the investment arena, specifically for the managing of equity…
We introduce the stochastic multiplicative point process modelling trading activity of financial markets. Such a model system exhibits power-law spectral density S(f) ~ 1/f**beta, scaled as power of frequency for various values of beta…
We report on new stability conditions for evolutionary dynamics in the context of population games. We adhere to the prevailing framework consisting of many agents, grouped into populations, that interact noncooperatively by selecting…
The influence of Commodity Trading Advisors (CTA) on the price process is explored with the help of a simple model. CTA managers are taken to be Kelly optimisers, which invest a fixed proportion of their assets in the risky asset and the…
It is now well established empirically that financial price changes are distributed according to a power law, with cubic exponent. This is a fascinating regularity, as it holds for various classes of securities, on various markets, and on…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…