Related papers: Prospect Agents and the Feedback Effect on Price F…
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…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
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…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the price process of the representative agent is not a…
A dynamical price formation model for financial assets is presented. It aims to capture the essence of speculative trading where mispricings of assets are used to make profits. It is shown that together with the incorporation of the concept…
We present a model of opinion dynamics in which agents adjust continuous opinions as a result of random binary encounters whenever their difference in opinion is below a given threshold. High thresholds yield convergence of opinions towards…
We introduce a system of kinetic equations describing an exchange market consisting of two populations of agents (dealers and speculators) expressing the same preferences for two goods, but applying different strategies in their exchanges.…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
The opinion dynamics of economic agents is modeled with the link structure influenced by the resulting opinions: Links between people of nearly the same opinion are more stable than those between people of vastly different opinions. A…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…
The \$-Game was recently introduced as an extension of the Minority Game. In this paper we compare this model with the well know Minority Game and the Majority Game models. Due to the inter-temporal nature of the market payoff, we introduce…
We propose a dynamic model of a prediction market in which agents predict the values of a sequence of random vectors. The main result shows that if there are agents who make correct (or asymptotically correct) next-period forecasts, then…
Pertaining to Agent-based Computational Economics (ACE), this work presents two models for the rise and downfall of speculative bubbles through an exchange price fixing based on double auction mechanisms. The first model is based on a…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…