Related papers: Agent-Based Models for Two Stocks with Superhedgin…
We consider a simplified version of the Wealth Game, which is an agent-based financial market model with many interesting features resembling the real stock market. Market makers are not present in the game so that the majority traders are…
We present an overview of some representative Agent-Based Models in Economics. We discuss why and how agent-based models represent an important step in order to explain the dynamics and the statistical properties of financial markets beyond…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
This paper presents a model of capital accumulation for a large number of heterogenous producer-consumers in an exchange space in which interactions depend on agents' positions. Each agent is described by his production, consumption, stock…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
We extend prior evidence that naively using intraday agent-based models that involve realistic order-matching processes for modeling continuous-time double auction markets seems to fail to be able to provide a robust link between data and…
This essay discusses the advantages of a probabilistic agent-based approach to questions in theoretical economics, from the nature of economic agents, to the nature of the equilibria supported by their interactions. One idea we propose is…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
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…
For autonomous agents to successfully operate in real world, the ability to anticipate future motions of surrounding entities in the scene can greatly enhance their safety levels since potentially dangerous situations could be avoided in…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
Large collections of coupled, heterogeneous agents can manifest complex dynamical behavior presenting difficulties for simulation and analysis. However, if the collective dynamics lie on a low-dimensional manifold then the original…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We introduce a simple benchmark model of dynamic matching in networked markets, where agents arrive and depart stochastically and the network of acceptable transactions among agents forms a random graph. We analyze our model from three…
We introduce a microscopic model of interacting financial agents, where each agent is characterized by two portfolios; money invested in bonds and money invested in stocks. Furthermore, each agent is faced with an optimization problem in…
In volatile financial markets, balancing risk and return remains a significant challenge. Traditional approaches often focus solely on equity allocation, overlooking the strategic advantages of options trading for dynamic risk hedging. This…