Related papers: Regulation Simulation
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
Modern physics has demonstrated that matter behaves very differently as it approaches the speed of light. This paper explores the implications of modern physics to the operation and regulation of financial markets. Information cannot move…
Modern economies evolved from simpler human exchanges into very convoluted systems. Today, a multitude of aspects can be regulated, tampered with, or left to chance; these are economic {\em degrees of freedom} which together shape the flow…
Financial and gambling markets are ostensibly similar and hence strategies from one could potentially be applied to the other. Financial markets have been extensively studied, resulting in numerous theorems and models, while gambling…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
The correlation matrix formalism is used to study temporal aspects of the stock market evolution. This formalism allows to decompose the financial dynamics into noise as well as into some coherent repeatable intraday structures. The present…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
Simulation is used extensively in autonomous systems, particularly in robotic manipulation. By far, the most common approach is to train a controller in simulation, and then use it as an initial starting point for the real system. We…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
Strategic voting, or manipulation, is the process by which a voter misrepresents his preferences in an attempt to elect an outcome that he considers preferable to the outcome under sincere voting. It is generally agreed that manipulation is…
In this paper we continue our descriptions of stock markets in terms of some non abelian operators which are used to describe the portfolio of the various traders and other {\em observable} quantities. After a first prototype model with…
Decision markets are mechanisms for selecting one among a set of actions based on forecasts about their consequences. Decision markets that are based on scoring rules have been proven to offer incentive compatibility analogous to properly…
We construct a financial "Turing test" to determine whether human subjects can differentiate between actual vs. randomized financial returns. The experiment consists of an online video-game (http://arora.ccs.neu.edu) where players are…
Molecular dynamics simulations use statistical mechanics at the atomistic scale to enable both the elucidation of fundamental mechanisms and the engineering of matter for desired tasks. The behavior of molecular systems at the microscale is…
Prediction markets are often used as mechanisms to aggregate information about a future event, for example, whether a candidate will win an election. The event is typically assumed to be exogenous. In reality, participants may influence the…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…