Related papers: A Prototype Model of Stock Exchange
Most economic theories typically assume that financial market participants are fully rational individuals and use mathematical models to simulate human behavior in financial markets. However, human behavior is often not entirely rational…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
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…
The paper presents an evolutionary economic model for the price evolution of stocks. Treating a stock market as a self-organized system governed by a fast purchase process and slow variations of demand and supply the model suggests that the…
A model for the phenomenological description of tick-by-tick share prices in a stock exchange is introduced. It is based on mixtures of compound Poisson processes. Preliminary results based on Monte Carlo simulation show that this model can…
This paper suggests that business cycles may be a manifestation of coupled real economy and stock market dynamics and describes a mechanism that can generate economic fluctuations consistent with observed business cycles. To this end, we…
We derive a mesoscopic description of the behavior of a simple financial market where the agents can create their own portfolio between two investment alternatives: a stock and a bond. The model is derived starting from the…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
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…
Market manipulation is a strategy used by traders to alter the price of financial securities. One type of manipulation is based on the process of buying or selling assets by using several trading strategies, among them spoofing is a popular…
We propose a series of simple models for the microstructure of a double auction market without intermediaries. We specialize to those markets, such interdealer broker markets, which are dominated by professional traders, who trade mainly…
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…
We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the…
Stock correlations is crucial to asset pricing, investor decision-making, and financial risk regulations. However, microscopic explanation based on agent-based modeling is still lacking. We here propose a model derived from minority game…
This paper outlines an agent-based model of a simple financial market in which a single asset is available for trade by three different types of traders. The model was first introduced in the PhD thesis of one of the authors, see reference…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We design a market-making model \`a la Avellaneda-Stoikov in which the market-takers act strategically, in the sense that they design their trading strategy based on an exogenous trading signal. The market-maker chooses her quotes based on…
The increasing richness in volume, and especially types of data in the financial domain provides unprecedented opportunities to understand the stock market more comprehensively and makes the price prediction more accurate than before.…