Related papers: Market simulation with hierarchical information fl…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
Human social behavior is organized in stratified, hierarchical networks, with a support group with about 5 members, expanding proportionally at each layer up to a maximum of approximately 150 frequent interactions per individual. This is…
The price impact for a single trade is estimated by the immediate response on an event time scale, i.e., the immediate change of midpoint prices before and after a trade. We work out the price impacts across a correlated financial market.…
We consider the design of prediction market mechanisms known as automated market makers. We show that we can design these mechanisms via the mold of \emph{exponential family distributions}, a popular and well-studied probability…
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 investigate knowledge exchange among commercial organisations, the rationale behind it and its effects on the market. Knowledge exchange is known to be beneficial for industry, but in order to explain it, authors have used high level…
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 probability distribution function (PDF) for prices on financial markets is derived by extremization of Fisher information. It is shown how on that basis the quantum-like description for financial markets arises and different financial…
We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
We propose coalescent mechanism of economic grow because of redistribution of external resources. It leads to Zipf distribution of firms over their sizes, turning to stretched exponent because of size-dependent effects, and predicts…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Hierarchical analysis is considered and a multilevel model is presented in order to explore causality, chance and complexity in financial economics. A coupled system of models is used to describe multilevel interactions, consistent with…
A new model for stocks markets using integer values for each stock price is presented. In contrast with previously reported models, the variables used in the model are not of binary type, but of more general integer type. It is shown how…