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This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
We propose a novel kinetic exchange model differing from previous ones in two main aspects. First, the basic dynamics is modified in order to represent economies where immediate wealth exchanges are carried out, instead of reshufflings or…
We consider in a market model the cooperative emergence of value due to a positive feedback between perception of needs and demand. Here we consider also a negative feedback from production of the traded products, and find that this…
Many recent models of trade dynamics use the simple idea of wealth exchanges among economic agents in order to obtain a stable or equilibrium distribution of wealth among the agents. In particular, a plain analogy compares the wealth in a…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
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…
This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a…
We introduce a stochastic agent-based model for the flocking dynamics of self-propelled particles that exhibit velocity-alignment interactions with neighbours within their field of view. The stochasticity in the dynamics of the model arises…
We introduce a system of kinetic equations describing an exchange market consisting of two populations of agents (dealers and speculators) expressing the same preferences for two goods, but applying different strategies in their exchanges.…
We propose a kinetic model to describe the dynamical evolution of wealth and knowledge in national and global markets, starting from a microscopic description of individual interactions. The model is built upon interaction rules that…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
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…
In this communication, some economic models given by functional mappings are addressed. These are models for random markets where agents trade by pairs and exchange their money in a random and conservative way. They display the exponential…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
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…
We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
An agent-based model with interacting low frequency liquidity takers inter-mediated by high-frequency liquidity providers acting collectively as market makers can be used to provide realistic simulated price impact curves. This is possible…