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A generalized continuous economic model is proposed for random markets. In this model, agents interact by pairs and exchange their money in a random way. A parameter controls the effectiveness of the transactions between the agents. We show…
In order to simulate the complex phenomena manifested in stock markets, we introduce a continuous asynchronous model in which millions of individual traders interact through a central orders matching mechanism, just as it happens in real…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
The call auction is a widely used trading mechanism, especially during the opening and closing periods of financial markets. In this paper, we study a standard call auction problem where orders are submitted according to Poisson processes,…
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…
We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the…
We apply the potential force estimation method to artificial time series of market price produced by a deterministic dealer model. We find that dealers' feedback of linear prediction of market price based on the latest mean price changes…
The existence of a (partial) market equilibrium price is proved in a complete, continuous time finite-agent market setting. The economic agents act as price takers in a fully competitive setting and maximize exponential utility from…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…
In this short paper, we study the simulation of a large system of stochastic processes subject to a common driving noise and fast mean-reverting stochastic volatilities. This model may be used to describe the firm values of a large pool of…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
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…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
In this article, we work towards the goal of developing agents that can learn to act in complex worlds. We develop a probabilistic, relational planning rule representation that compactly models noisy, nondeterministic action effects, and…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…