Related papers: Modelling stock correlations with expected returns…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the…
Just as war is sometimes fallaciously represented as a zero sum game -- when in fact war is a negative sum game - stock market trading, a positive sum game over time, is often erroneously represented as a zero sum game. This is called the…
What return should you expect when you take on a given amount of risk? How should that return depend upon other people's behavior? What principles can you use to answer these questions? In this paper, we approach these topics by exploring…
It is usually assumed that stock prices reflect a balance between large numbers of small individual sellers and buyers. However, over the past fifty years mutual funds and other institutional shareholders have assumed an ever increasing…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We consider a version of large population games whose agents compete for resources using strategies with adaptable preferences. The games can be used to model economic markets, ecosystems or distributed control. Diversity of initial…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…
This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…
Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
An agent-based model with interacting low frequency liquidity takers inter-mediated by high-frequency liquidity providers acting collectively as market makers can be used to provide realistic simulated price impact curves. This is possible…
The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…
Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…
This paper examines the relationship between casino rules, players' gambling strategies, and their expected returns, and derives the formula about the players' expected return.