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This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
Many natural systems exhibit dynamics characterized by alternating phases or recurring sets of states. Describing the fluctuations of such systems over stochastic trajectories is necessary across diverse fields, from biological motors to…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
This paper studies the trading volumes and wealth distribution of a novel agent-based model of an artificial financial market. In this model, heterogeneous agents, behaving according to the Von Neumann and Morgenstern utility theory, may…
The high-order complexity of human behaviour is likely the root cause of extreme difficulty in financial market projections. We consider that behavioural simulation can unveil systemic dynamics to support analysis. Simulating diverse human…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
Some of the most relevant future applications of multi-agent systems like autonomous driving or factories as a service display mixed-motive scenarios, where agents might have conflicting goals. In these settings agents are likely to learn…
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…
Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…
This work introduces a new framework for modeling financial markets through an interpretable probabilistic state machine. By clustering historical returns based on momentum and risk features across multiple time horizons, we identify…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
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…
Earlier we proposed the stochastic point process model, which reproduces a variety of self-affine time series exhibiting power spectral density S(f) scaling as power of the frequency f and derived a stochastic differential equation with the…
The modelling of modern power markets requires the representation of the following main features: (i) a stochastic dynamic decision process, with uncertainties related to renewable production and fuel costs, among others; and (ii) a…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
Systems with long-range interactions often exhibit power-law distributions and can by described by the non-extensive statistical mechanics framework proposed by Tsallis. In this contribution we consider a simple model reproducing continuous…
The development of stochastic thermodynamics during the last decades prompted the discovery of novel nonequilibrium relations refining our understanding of the second law in small fluctuating systems and its connection with information…
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…
An exact solution is presented to a model that mimics the crowding effect in financial markets which arises when groups of agents share information. We show that the size distribution of groups of agents has a power law tail with an…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…