Related papers: Derivation of ARCH(1) process from market price ch…
We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash…
Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…
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…
The current paper proposes a novel variational Bayes predictive coding RNN model, which can learn to generate fluctuated temporal patterns from exemplars. The model learns to maximize the lower bound of the weighted sum of the…
We present a synthetic prediction market whose agent purchase logic is defined using a sigmoid transformation of a convex semi-algebraic set defined in feature space. Asset prices are determined by a logarithmic scoring market rule. Time…
We propose a kinetic model to describe the dynamical evolution of wealth and knowledge in national and global markets, starting from a microscopic description of individual interactions. The model is built upon interaction rules that…
We explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate a game or not, the game being profitable when…
We propose a Markov jump process with the three-state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
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…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition…
The 2002 Trading Agent Competition (TAC) presented a challenging market game in the domain of travel shopping. One of the pivotal issues in this domain is uncertainty about hotel prices, which have a significant influence on the relative…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
Transformer models have become increasingly popular in financial applications, yet their potential risk making and biases remain under-explored. The purpose of this work is to audit the reliance of the model on volatile data for…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…