Related papers: Modelling Financial Markets by Self-Organized Crit…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
Exploring complex adaptive financial trading environments through multi-agent based simulation methods presents an innovative approach within the realm of quantitative finance. Despite the dominance of multi-agent reinforcement learning…
In market modeling, one often treats buyers as a homogeneous group. In this paper we consider buyers with heterogeneous preferences and products available in many variants. Such a framework allows us to successfully model various market…
We find empirically a characteristic sharp peak-flat trough pattern in a large set of commodity prices. We argue that the sharp peak structure reflects an endogenous inter-market organization, and that peaks may be seen as local…
We present a simple model of a non-equilibrium self-organizing market where asset prices are partially driven by investment decisions of a bounded-rational agent. The agent acts in a stochastic market environment driven by various exogenous…
We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of…
The recent financial crisis has sharply revealed that current understanding of the global financial system is more than limited. In the recovery plan the confidence in the underlying theory is crucial. To address the problem we propose the…
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…
The paper treats the financial market as a communication system, using four information-theoretic assumptions to derive an idealized model with only one parameter. State variables are scalar stationary diffusions. The model minimizes the…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
We discuss a method for predicting financial movements and finding pockets of predictability in the price-series, which is built around inferring the heterogeneity of trading strategies in a multi-agent trader population. This work explores…
This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogenous traders. Offer and demand of liquidity drives price formation and traders anticipate future evolutions of the order book. The…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
In the Cont-Bouchaud model [cond-mat/9712318] of stock markets, percolation clusters act as buying or selling investors and their statistics controls that of the price variations. Rather than fixing the concentration controlling each…
We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise…
Using techniques from information geometry, we construct a semi-Hamiltonian system modelling trader beliefs in a binary asset market and study the impact of inequality or asymmetry in beliefs, information, and power on price dynamics. We…