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The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
On the framework of the Linear Farmer's Model, we approach the indeterminacy of agents' behaviour by associating with each agent an unconditional probability for her to be active at each time step. We show that Pareto tailed returns can…
In this communication, some economic models given by functional mappings are addressed. These are models for random markets where agents trade by pairs and exchange their money in a random and conservative way. They display the exponential…
It is known that asset exchange models with symmetric interaction between agents show either a Gibbs/log-normal distribution of assets among the agents or condensation of the entire wealth in the hands of a single agent, depending upon the…
In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting…
We present a model of predatory traders interacting with each other in the presence of a central reserve (which dissipates their wealth through say, taxation), as well as inflation. This model is examined on a network for the purposes of…
Models of auctions or tendering processes are introduced. In every round of bidding the players select their bid from a probability distribution and whenever a bid is unsuccessful, it is discarded and replaced. For simple models, the…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…
We propose a set of conservative models in which agents exchange wealth with a preference in the choice of interacting agents in different ways. The common feature in all the models is that the temporary values of financial status of agents…
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 have numerically simulated the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving two-body collision. Unlike in the ideal gas, we introduce…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
We mathematically analyze a simple market model where trading at each point in time involves only two agents with the sum of their money being conserved and with neither parties resulting with negative money after the interaction process.…
Algorithmic trading relies on machine learning models to make trading decisions. Despite strong in-sample performance, these models often degrade when confronted with evolving real-world market regimes, which can shift dramatically due to…
By incorporating market impact and momentum traders into an agent-based model, we investigate the conditions for the occurrence of self-reinforcing feedback loops and the coevolutionary mechanism of prices and strategies. For low market…
This paper considers ideal gas-like models of trading markets, where each agent is identified as a gas molecule that interacts with others trading in elastic or money-conservative collisions. Traditionally, these models introduce different…
In this paper, we conduct a large-scale field experiment to investigate the manipulability of prediction markets. The main experiment involves randomly shocking prices across 817 separate markets; we then collect hourly price data to…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…