Related papers: Inner Market as a "Black Box"
The distribution of returns in financial time series exhibits heavy tails. In empirical studies, it has been found that gaps between the orders in the order book lead to large price shifts and thereby to these heavy tails. We set up an…
We present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining…
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…
Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is…
A social network is often divided into many factions. People are friends within each faction, while they are enemies of the other factions, and even my enemy's enemy is not necessarily my friend. This configuration can be described in terms…
An open market is a subset of an entire equity market composed of a certain fixed number of top capitalization stocks. Though the number of stocks in the open market is fixed, the constituents of the market change over time as each…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
The world's stock markets display a decades-long pattern of overnight and intraday returns seemingly consistent with only one explanation: one or more large, long-lived quant firms tending to expand its portfolio early in the day (when its…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
In the last years many accurate decision support systems have been constructed as black boxes, that is as systems that hide their internal logic to the user. This lack of explanation constitutes both a practical and an ethical issue. The…
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…
We present an empirical study of the intertwined behaviour of members in a financial market. Exploiting a database where the broker that initiates an order book event can be identified, we decompose the correlation and response functions…
In this paper, we present a multi-period trading model in the style of Kyle (1985)'s inside trading model, by assuming that there are at least two insiders in the market with long-lived private information, under the requirement that each…
We consider a Kyle-type model where insider trading takes place among a potentially large population of liquidity traders and is subject to legal penalties. Insiders exploit the liquidity provided by the trading masses to "camouflage" their…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…