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In this work, we aim to gain a better understanding of the volatility smile observed in options markets through microsimulation (MS). We adopt two types of active traders in our MS model: speculators and arbitrageurs, and call and put…
We use generating functional analysis to study minority-game type market models with generalized strategy valuation updates that control the psychology of agents' actions. The agents' choice between trend following and contrarian trading,…
In this study, we investigate the statistical properties of the returns and the trading volume. We show a typical example of power-law distributions of the return and of the trading volume. Next, we propose an interacting agent model of…
This work suggests modifications to a previously introduced class of heterogeneous agent models that allow for the inclusion of different types of agent motivations and behaviours in a unified way. The agents operate within a highly…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
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…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
We suggest use continuous numerical risk grades [0,1] of R for a single risk or the unit cube in Rn for n risks as the economic domain. We consider risk ratings of economic agents as their coordinates in the economic domain. Economic…
This paper presents a simple agent-based model of an economic system, populated by agents playing different games according to their different view about social cohesion and tax payment. After a first set of simulations, correctly…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
The speculation game is an agent-based toy model to investigate the dynamics of the financial market. Our model has achieved the reproduction of 10 of the well-known stylized facts for financial time series. However, there is also a…
In this paper, we present a simple stock market model (the market game) which incorporates, as ab initio dynamics delayed majority dynamics, according to which agents (with heterogeneous strategies and price expectations) are rewarded if…
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We propose a projected gradient dynamical system as a model for a bargaining scheme for an asset for which the two interested agents have personal valuations which do not initially coincide. The personal valuations are formed using…
We introduce and treat rigorously a new multi-agent model of the continuous double auction or in other words the order book (OB). It is designed to explain collective behaviour of the market when new information affecting the market…
We study dynamics of a simulated world with stock and money, driven by the externally given processes which we refer to as sentiments. The considered sentiments influence the buy/sell stock trading attitude, the perceived price uncertainty,…