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We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly…
A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…
By investigating nonfungible tokens (NFTs), we provide the first systematic study of retail investor behavior through asset bubbles. Given that NFTs are recorded in public blockchains, we are able to track investor behavior over time,…
We present a detailed study of the statistical properties of an Agent Based Model and of its generalization to the multiplicative dynamics. The aim of the model is to consider the minimal elements for the understanding of the origin of the…
Quasi-equilibrium models for aggregate variables are widely-used throughout finance and economics. The validity of such models depends crucially upon assuming that the systems' participants behave both independently and in a Markovian…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
Financial price changes obey two universal properties: they follow a power law and they tend to be clustered in time. The second regularity, known as volatility clustering, entails some predictability in the price changes: while their sign…
This review is a partial synthesis of the book ``Why stock market crash'' (Princeton University Press, January 2003), which presents a general theory of financial crashes and of stock market instabilities that his co-workers and the author…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
We consider open multi-agent systems, which are systems subject to frequent arrivals and departures of agents while the studied process takes place. We study the behavior of all-to-all pairwise gossip interactions in such open systems.…
We introduce and solve a model that mimics the herding effect in financial markets when groups of agents share information. The number of agents in the model is growing and at each time step either (i) with probability $p$ an incoming agent…
We present an agent behavior based microscopic model that induces jumps, spikes and high volatility phases in the price process of a traded asset. We transfer dynamics of thermally activated jumps of an unexcited/ excited two state system…
We present our approach to the problem of how an agent, within an economic Multi-Agent System, can determine when it should behave strategically (i.e. learn and use models of other agents), and when it should act as a simple price-taker. We…
Using a recently introduced rational expectation model of bubbles, based on the interplay between stochasticity and positive feedbacks of prices on returns and volatility, we develop a new methodology to test how this model classifies 9…
We propose a model for equity trading in a population of agents where each agent acts to achieve his or her target stock-to-bond ratio, and, as a feedback mechanism, follows a market adaptive strategy. In this model only a fraction of…
This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The…