Related papers: Derivation of ARCH(1) process from market price ch…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
We study an agent-based stock market model with heterogeneous agents and friction. Our model is based on that of Foellmer-Schweizer(1993): The process of a stock price in a discrete-time framework is determined by temporary equilibria via…
We present a dynamical model for the price evolution of financial assets. The model is based in a two level structure. In the first stage one finds an agent-based model that describes the present state of the investors' beliefs,…
We compare our results on empirical analysis of financial data with simulations of two stochastic models of the dynamics of stock market prices. The two models are (i) the truncated L\'evy flight recently introduced by us and (ii) the…
We introduce a minimal Agent Based Model with two classes of agents, fundamentalists (stabilizing) and chartists (destabilizing) and we focus on the essential features which can generate the stylized facts. This leads to a detailed…
We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…
We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered 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…
We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…
The AI traders in financial markets have sparked significant interest in their effects on price formation mechanisms and market volatility, raising important questions for market stability and regulation. Despite this interest, a…
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…
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 present an agent based model of a single asset financial market that is capable of replicating several non-trivial statistical properties observed in real financial markets, generically referred to as stylized facts. While previous…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
We propose a class of Markovian agent based models for the time evolution of a share price in an interactive market. The models rely on a microscopic description of a market of buyers and sellers who change their opinion about the stock…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…