Related papers: A Classical Model of Speculative Asset Price Dynam…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
We present a simple model of a stock market where a random communication structure between agents gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
The condition for stationary increments, not scaling, detemines long time pair autocorrelations. An incorrect assumption of stationary increments generates spurious stylized facts, fat tails and a Hurst exponent H_s=1/2, when the increments…
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 document and analyze the empirical facts concerning one of the clearest evidence of speculation in financial trading as observed in the postage collection stamp market. We unravel some of the mechanisms of speculative behavior which…
It is widely believed that fluctuations in transaction volume, as reflected in the number of transactions and to a lesser extent their size, are the main cause of clustered volatility. Under this view bursts of rapid or slow price diffusion…
Modifications of the Cont-Bouchaud percolation model for price fluctuations give an asymmetry for time-reversal, an asymmetry between high and low prices, volatility clustering, effective multifractality, correlations between volatility and…
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
In this paper we discuss the problem of the estimation of extreme event occurrence probability for data drawn from some multifractal process. We also study the heavy (power-law) tail behavior of probability density function associated with…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
An analysis of the stylized facts in financial time series is carried out. We find that, instead of the heavy tails in asset return distributions, the slow decay behaviour in autocorrelation functions of absolute returns is actually…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
As a typical representation of complex networks studied relatively thoroughly, financial market presents some special details, such as its nonconservation and opinions spreading. In this model, agents congregate to form some clusters, which…
During a speculative episode the price of an item jumps from an initial level p_1 to a peak level p_2 before more or less returning to level p_1. The ratio p_2/p_1 is referred to as the amplitude A of the peak. This paper shows that for a…