Related papers: Analytic solutions in a continuous-time financial …
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
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…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
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…
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
In order to simulate the complex phenomena manifested in stock markets, we introduce a continuous asynchronous model in which millions of individual traders interact through a central orders matching mechanism, just as it happens in real…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
The modelling of financial markets presents a problem which is both theoretically challenging and practically important. The theoretical aspects concern the issue of market efficiency which may even have political implications…
This paper investigates how similarity in the informational representation of market states among Artificial Intelligence (AI) trading agents can generate systemic instability in financial markets. We construct a structural multi-agent…
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 markets are often driven by latent factors which traders cannot observe. Here, we address an algorithmic trading problem with collections of heterogeneous agents who aim to perform optimal execution or statistical arbitrage, where…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…
Market impact has become a subject of increasing concern among academics and industry experts. We put forward a price impact model which considers the heteroscedasticity of price in the time dimension and dependency between permanent impact…