Related papers: Prospect Agents and the Feedback Effect on Price F…
Two-sided matching markets have long existed to pair agents in the absence of regulated exchanges. A common example is school choice, where a matching mechanism uses student and school preferences to assign students to schools. In such…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
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…
Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to…
People often interact repeatedly: with relatives, through file sharing, in politics, etc. Many such interactions are reciprocal: reacting to the actions of the other. In order to facilitate decisions regarding reciprocal interactions, we…
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…
We present a simple dynamical model for describing trading interactions between agents in a social network by considering only two dynamical variables, namely money and goods or services, that are assumed conserved over the whole time span…
We consider a simplified version of the Wealth Game, which is an agent-based financial market model with many interesting features resembling the real stock market. Market makers are not present in the game so that the majority traders are…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…
In this paper it was developed a modification of the known multiagent model Minority Game, designed to simulate the behavior of traders in financial markets and the resulting price dynamics on the abstract resource. The model was…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
This paper presents macroeconomic model that is based on parallels between macroeconomic multi-agent systems and multi-particle systems. We use risk ratings of economic agents as their coordinates on economic space. Aggregates of economic…
Different agents need to make a prediction. They observe identical data, but have different models: they predict using different explanatory variables. We study which agent believes they have the best predictive ability -- as measured by…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
Agent-based modeling is a powerful simulation technique to understand the collective behavior and microscopic interaction in complex financial systems. Recently, the concept for determining the key parameters of the agent-based models from…
We develop a theory of bid and ask price dynamics where the two prices form due to interaction of buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask"…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
We investigate the financial market dynamics by introducing a heterogeneous agent-based opinion formation model. In this work, we organize the individuals in a financial market by their trading strategy, namely noise traders and…