Related papers: The Minimal Model of Financial Complexity
We consider different levels of complexity which are observed in the empirical investigation of financial time series. We discuss recent empirical and theoretical work showing that statistical properties of financial time series are rather…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
Artificial stock market simulation based on agent is an important means to study financial market. Based on the assumption that the investors are composed of a main fund, small trend and contrarian investors characterized by four…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
As a typical representation of complex networks studied relatively thoroughly, financial market presents some special details, such as its nonconservation and opinions spreading. In this model, agents congregate to form some clusters, which…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
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…
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states…
A new simple model of financial market is proposed, based on the sequential and inter-temporal nature of trader-trader interaction, and on a new simple trading strategy space. In this pattern-based speculation model, the traders open and…
Financial economic models often assume that investors know (or agree on) the fundamental value of the shares of the firm, easing the passage from the individual to the collective dimension of the financial system generated by the Share…
A financial market model with general semimartingale asset-price processes and where agents can only trade using no-short-sales strategies is considered. We show that wealth processes using continuous trading can be approximated very…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
We present a dynamical model for the price evolution of financial assets. The model is based in a two level structure. In the first stage one finds an agent-based model that describes the present state of the investors' beliefs,…
We propose that the minimal requirements for a model of stock market price fluctuations should comprise time asymmetry, robustness with respect to connectivity between agents, ``bounded rationality'' and a probabilistic description. We also…