Manipulation of the Bitcoin market: an agent-based study

Fraudulent actions of a trader or a group of traders can cause substantial disturbance to the market, both directly influencing the price of an asset or indirectly by misinforming other market participants. Such behavior can be a source of systemic risk and increasing distrust for the market participants, consequences that call for viable countermeasures. Building on the foundations provided by the extant literature, this study aims to design an agent-based market model capable of reproducing the behavior of the Bitcoin market during the time of an alleged Bitcoin price manipulation that occurred between 2017 and early 2018. The model includes the mechanisms of a limit order book market and several agents associated with different trading strategies, including a fraudulent agent, initialized from empirical data and who performs market manipulation. The model is validated with respect to the Bitcoin price as well as the amount of Bitcoins obtained by the fraudulent agent and the traded volume. Simulation results provide a satisfactory fit to historical data. Several price dips and volume anomalies are explained by the actions of the fraudulent trader, completing the known body of evidence extracted from blockchain activity. The model suggests that the presence of the fraudulent agent was essential to obtain Bitcoin price development in the given time period; without this agent, it would have been very unlikely that the price had reached the heights as it did in late 2017. The insights gained from the model, especially the connection between liquidity and manipulation efficiency, unfold a discussion on how to prevent illicit behavior

How markets slowly digest changes in supply and demand

In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly incorporated into prices. Because revealed market liquidity is extremely low, large orders to buy or sell can only be traded incrementally, over periods of time as long as months. As a result order flow is a highly persistent long-memory process. Maintaining compatibility with market efficiency has profound consequences on price formation, on the dynamics of liquidity, and on the nature of impact. We review a body of theory that makes detailed quantitative predictions about the volume and time dependence of market impact, the bid-ask spread, order book dynamics, and volatility. Comparisons to data yield some encouraging successes. This framework suggests a novel interpretation of financial information, in which agents are at best only weakly informed and all have a similar and extremely noisy impact on prices. Most of the processed information appears to come from supply and demand itself, rather than from external news. The ideas reviewed here are relevant to market microstructure regulation, agent-based models, cost-optimal execution strategies, and understanding market ecologies.Comment: 111 pages, 24 figure

The impact of corporate governance mechanism : audit committee financial experts on firm value from the perspective of the financial reporting process : evidence from US, UK and Germany

This PhD thesis contains four main essays on financial health and firm value, with a focus on the term board structure – unitary and dual. With the exception of Chapter 1 and Chapter 6, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work.In Chapter 2, we model and predict, using FTSE100 and Nasdaq100 sample data, the impact of audit committee financial experts on firm value. Model dimensions and parameters were conducted over a period of five years and allowed to change to four years, so as to ascertain lag effects. The proposed financial expert decision - making model (Throughput Model) allows us to estimate these influences. Hence, we find mixed results.Chapter 3 investigates ethical consideration influences on the role of United States, United Kingdom and German audit committees. Simultaneously, we empirically test whether financial experts may influence firm value in German Dax100 firms using the preference –based pathway. Our empirical results suggest that accounting experts exerts significant influence on firm value.Chapter 4 examines the impact of regulations on the performance of Nasdaq100 firms in the US. Our result suggest that the Sarbanes – Oxley Act has indeed changed the dynamics of business structure and improved monitoring. We find evidence of a positive significant influence of supervisory financial expert on financial health but accounting experts, negative

A two-pillar strategy to keep inflation expectations at bay: A basic theoretical framework.

Using a simple macro-economic model, this study shows how a two-pillar monetary strategy as practiced by the European central bank (ECB) can be conceived to guarantee dynamic macro-economic stability and the credibility of monetary policy. This strategy can be interpreted as a combination of inflation targeting and monetary base targeting. A commitment to a long-run monetary base growth rate (monetary targeting) corresponding to inflation target could reinforce the credibility of central bank announcements and the role of inflation target as strong and credible nominal anchor for private inflation expectations. However, achieving price stability under inflationtargeting regime associated with Friedman’s money supply rule can generate dynamic instability in output, inflation and money demand. Alternative stabilizing monetary targeting rules, of which the design depends on economic structure and central bank preferences, are discussed relative to their capability to warrant dynamic macroeconomic stability.two-pillar monetary strategy, inflation targeting, monetary targeting, macroeconomic stability.

Assessing the Volume of Changes to Banking Assets and Liabilities Using Genetic Algorithms in Additional Funds Needed Model

This paper investigates Small-Medium Banks’ (SMBs) business plans in accordance with the structure of Additional Funds Needed (AFN) model. The Key Profitability Variables (KPVs) are the size and structure of deposits, loans, and their interest rates. This study employs a Genetic Algorithm (GA) problem with hard constraints, to point out the limits to changes in the structure of deposits and loans and the effects of those changes on the P&L of a banking institution. After examining 10,000 iterations with Evolver, an innovative optimization software that uses GA, OptQuest, and linear programming, the alternations, have been narrowed down to 3700 which satisfy both, a) constraints and b) maximization of profits. Having also the distributions, this paper concludes that it is a useful methodology that must be further exploited by applying risk weights, mainly for credit risk, to the structural components of the Balance Sheet, and to other competitive institutions. Keywords: banking institutions, genetic algorithms, additional funds needed, operational researc

Proceedings of the 2nd Conference on Production Systems and Logistics (CPSL 2021)

Proceedings of the CPSL 202

The evolution and dynamics of stocks on the Johannesburg Securities Exchange and their implications for equity investment management

[No subject] This thesis explores the dynamics of the Johannesburg Stock Exchange returns to understand how they impact stock prices. The introductory chapter renders a brief overview of financial markets in general and the Johannesburg Securities Exchange (JSE) in particular. The second chapter employs the fractal analysis technique, a method for estimating the Hurst exponent, to examine the JSE indices. The results suggest that the JSE is fractal in nature, implying a long-term predictability property. The results also indicate a logical system of variation of the Hurst exponent by firm size, market characteristics and sector grouping. The third chapter investigates the economic and political events that affect different market sectors and how they are implicated in the structural dynamics of the JSE. It provides some insights into the degree of sensitivity of different market sectors to positive and negative news. The findings demonstrate transient episodes of nonlinearity that can be attributed to economic events and the state of the market. Chapter 4 looks at the evolution of risk measurement and the distribution of returns on the JSE. There is evidence of fat tails and that the Student t-distribution is a better fit for the JSE returns than the Normal distribution. The Gaussian based Value-at-Risk model also proved to be an ineffective risk measurement tool under high market volatility. In Chapter 5 simulations are used to investigate how different agent interactions affect market dynamics. The results show that it is possible for traders to switch between trading strategies and this evolutionary switching of strategies is dependent on the state of the market. Chapter 6 shows the extent to which endogeneity affects price formation. To explore this relationship, the Poisson Hawkes model, which combines exogenous influences with self-excited dynamics, is employed. Evidence suggests that the level of endogeneity has been increasing rapidly over the past decade. This implies that there is an increasing influence of internal dynamics on price formation. The findings also demonstrate that market crashes are caused by endogenous dynamics and exogenous shocks merely act as catalysts. Chapter 7 presents the hybrid adaptive intelligent model for financial time series prediction. Given evidence of non-linearity, heterogeneous agents and the fractal nature of the JSE market, neural networks, fuzzy logic and fractal theory are combined, to obtain a hybrid adaptive intelligent model. The proposed system outperformed traditional models

Stability of a time-homogeneous system of money and antimoney & kinetic microscale thermophoresis

Human history is pervaded with financial crises. Lately, the global financial crisis of 2008 highlighted the role of uncontrolled creation of money through lending as a relevant source of financial instability. Motivated by an analogy to particle physics, time-homogeneity is imposed on monetary systems to approach and even possibly solve the associated problems. This implies a full reserve banking with a two-currency system which discriminates with an exchange rate between non-bank assets (money) and bank assets (antimoney). Payments can be made by passing on money in exchange for a good or receiving antimoney along with the good at respective price levels. Liquidity can be provided by the simultaneous transfer of money and antimoney at a negotiated exchange rate between money and antimoney, also termed the liquidity price. In this system, interest rates and credit creation are replaced by a varying price for liquidity. Here, the economic stability of such a system with an agent-based random economy model is studied, in which households and firms are urged by random boundary conditions to apply stochastic exchanges of goods via a limit order book mechanism, implementing the trading scheme of stock markets. The comparison of the market simulations for equilibrium and external shock scenarios of the prevailing monetary system with the money-antimoney system highlights two core aspects: First, the need of debt-limiting boundary conditions in order to equilibrate markets and second the similarity of the price dynamics of the studied systems as an indicator of fundamental functionality of the money-antimoney system. The formation, stability and dissociation of biological ligand-binder systems play a fundamental role in nearly all aspects of living matter. Whereas the binding affinity is well described for many molecular ligand-binder interactions, their kinetic association and dissociation rates are far less well studied, due to lack of comprehensive experimental techniques. Here, Kinetic Microscale Thermophoresis KMST is established, which allows for a purely optical, immobilization-free and quantitative analysis of kinetic rates of biological ligand-binder processes. In a KMST measurement, the kinetic fingerprint is extracted from the fluorescence change back to equilibrium within a formerly IR laser-heated spot. Kinetic relaxation time constants between 0.01-0.5 /s can be measured, allowing for the determination of on-rates 10^4-10^6 /Ms and off-rates 10^-4 - 0.1/s in principle. For Cy5-labeled DNA strands, the expected exponential dependence of the off-rates on salt concentration, strand length and inverse temperature, respectively, was confirmed and measurements in crowded solutions were performed. The measured on-rates show linear dependence on salt concentration but weak dependence on strand length and inverse temperature. For biological reaction processes with sufficient enthalpic component, KMST offers a suitable immobilization-free determination of kinetic ratesFinanzkrisen treten in der Geschichte der Menschheit frequent auf. Die globale Finanzkrise machte 2008 im Besonderen die Rolle unkontrollierter Kreditschöpfung als relevante Quelle finanzieller Instabilität deutlich. Motiviert durch eine Analogie zur Teilchenphysik wird Zeithomogenität auf ein Geldsystem angewandt, um die mit Kreditschöpfung verbundenen Probleme zu mindern und möglicherweise auch zu lösen. Das führt zu einem Vollgeldsystem mit zwei distinkten Währungen: Nichtbankaktiva (Geld) und Bankaktiva (Antigeld). In diesem Geld-Antigeldsystem kö̈nnen Zahlungen durch Entgegennahme von Geld gegen eine Ware oder durch den Transfer von Antigeld zusammen mit der Ware zum jeweiligen Preis abgewickelt werden. Liquidität kann durch den gleichzeitigen Transfer von Geld und Antigeld zu einem ausgehandelten Liquiditä̈tspreis zwischen Geld und Antigeld bereitgestellt werden. Der variierende Liquiditätspreis ersetzt Zinssätze und Kreditschöpfung. Die wirtschaftliche Stabilität eines solchen Systems wurde mithilfe eines agentenbasierten Zufallsökonomiemodells untersucht. In diesem handeln Haushalte und Unternehmen stochastisch Güter auf einer zentralen Limit-Orderbuch Börse äquivalent zu Handelsschemata an Aktienmärkten. Der Vergleich der Marktsimulationen für Gleichgewichts- und externe Schockszenarien des vorherrschenden Geldsystems mit dem Geld- Antigeld-System verdeutlicht zwei Kernergebnisse: Erstens, die Notwendigkeit individueller schuldenbegrenzender Randbedingungen, um effiziente Gleichgewichte in den Märkten zu erzielen und zweitens eine ähnliche Preisdynamik zum vorherrschenden Geldsystem, die auf eine grundlegende Funktionalität des Geld-Antigeldsystems hinweist. Die Bildung, Stabilität und Dissoziation biologischer Liganden-Binder-Systeme spielen eine fundamentale Rolle in fast allen Aspekten belebter Materie. Während die Bindungsaffinitäten für viele molekulare Liganden-Binder-Systeme gut beschrieben sind, sind die kinetischen Assoziations- und Dissoziationsraten weniger gut erforscht. Mit der weit verbreiteten Microscale Thermophoresis Technik MST, werden mittels mikroskaliger Temperaturgradienten die Affinitäten von Ligand-Bindersystemen bestimmt. Durch eine im Vergleich zur MST Technik um eine Größenordnung verbesserte thermische Anbdingung des Samples kö̈nnen mit der neuartigen kinetische mikroskalige Thermophorese Technik KMST zusätzlich quantitativ die kinetischen Raten auf rein optischer und immo- bilisationsfreier Basis bestimmt werden. Bei einer KMST-Messung wird der kinetische Fingerabdruck aus der Fluoreszenzänderung zurück zum Gleichgewicht innerhalb eines zuvor IR-laserbeheizten Spots extrahiert. Gemessene kinetische Relaxationszeitkonstanten zwischen 0.01–0.5 /s lassen die Bestimmung von Assoziationsraten 10^4–10^6 /Ms und Dissoziationsraten 10^-4 - 10^-1 /s prinzipiell zu. Für Cy5-markierte komplementäre DNA-Stränge wurde die erwartete exponentielle Abhängigkeit der Dissozitationsraten und Dissoziationskonstanten von Salzkonzentration, Stranglänge und inverser Temperatur bestätigt und Raten in makromolekular gedrängten Lösungen gemessen. Die gemessenen Assoziationsraten weisen eine lineare Abhängigkeit von der Salzkonzentration auf, eine schwache Abhängigkeit von der Stranglänge und der inversen Temperatur. Für biologische Reaktionsprozesse mit ausreichender enthalpischer Komponente bietet KMST eine immobilisationsfreie Bestimmung der kinetischen Raten