Related papers: Speculative bubbles and fat tail phenomena in a he…
Stock markets can be characterized by fat tails in the volatility distribution, clustering of volatilities and slow decay of their time correlations. For an explanation models with several mechanisms and consequently many parameters as the…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
We study the dynamics of exchange value in a system composed of many interacting agents. The simple model we propose exhibits cooperative emergence and collapse of global value for individual goods. We demonstrate that the demand that…
We study a simple model of an asset market with informed and non-informed agents. In the absence of non-informed agents, the market becomes information efficient when the number of traders with different private information is large enough.…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
In this paper, we study the herding phenomena in financial markets arising from the combined effect of (1) non-coordinated collective interactions between the market players and (2) concurrent reactions of market players to dynamic market…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
The high-order complexity of human behaviour is likely the root cause of extreme difficulty in financial market projections. We consider that behavioural simulation can unveil systemic dynamics to support analysis. Simulating diverse human…
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…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
Background: For complex financial systems, the negative and positive return-volatility correlations, i.e., the so-called leverage and anti-leverage effects, are particularly important for the understanding of the price dynamics. However,…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
Noncausal, or anticipative, heavy-tailed processes generate trajectories featuring locally explosive episodes akin to speculative bubbles in financial time series data. For $(X_t)$ a two-sided infinite $\alpha$-stable moving average (MA),…
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 a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
Metastability is a phenomenon observed in stochastic systems which stay in a false-equilibrium within a region of its state space until the occurrence of a sequence of rare events that leads to an abrupt transition to a different region.…
This paper presents a novel study on gas-like models for economic systems. The interacting agents and the amount of exchanged money at each trade are selected with different levels of randomness, from a purely random way to a more chaotic…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…