68,743 research outputs found
Trading heterogeneity under information uncertainty
© 2016 Elsevier B.V. Instead of heuristical heterogeneity assumption in the current heterogeneous agent models (HAMs), we derive the trading heterogeneity by introducing information uncertainty about the fundamental value to a HAM. Conditional on their private information about the fundamental value, agents choose different trading strategies when optimizing their expected utilities. This provides a micro-foundation to heterogeneity and switching behavior of agents. We show that the HAM with trading heterogeneity originating from the incomplete information performs equally well, if not better than existing HAMs, in generating bubbles, crashes, and mean-reverting prices. The simulated time series matches with the S&P 500 in terms of power law distribution in returns, volatility clustering and long memory in volatility
(Virtual) Agents for running electricity markets
This paper describes a multi-agent based simulation (MABS) framework to construct an artificial electric power market populated with learning agents. The artificial market, named TEMMAS (The Electricity Market Multi-Agent Simulator), explores the integration of two design constructs: (i) the specification of the environmental physical market properties and (ii) the specification of the decision-making (deliberative) and reactive agents. TEMMAS is materialized in an experimental setup involving distinct power generator companies that operate in the market and search for the trading strategies that best exploit their generating units' resources. The experimental results show a coherent market behavior that emerges from the overall simulated environment
Strategy correlations and timing of adaptation in Minority Games
We study the role of strategy correlations and timing of adaptation for the
dynamics of Minority Games, both simulationally and analytically. Using the
exact generating functional approach a la De Dominicis we compute the phase
diagram and the behaviour of batch and on-line games with correlated
strategies, complementing exisiting replica studies of their statics. It is
shown that the timing of adaptation can be relevant; while conventional games
with uncorrelated strategies are nearly insensitive to the choice of on-line
versus batch learning, we find qualitative differences when anti-correlations
are present in the strategy assignments. The available standard approximations
for the volatility in terms of persistent order parameters in the stationary
ergodic states become unreliable in batch games under such circumstances. We
then comment on the role of oscillations and the relation to the breakdown of
ergodicity. Finally, it is discussed how the generating functional formalism
can be used to study mixed populations of so-called `producers' and
`speculators' in the context of the batch minority games.Comment: 15 pages, 13 figures, EPJ styl
Robust Risk-Aware Option Hedging
The objectives of option hedging/trading extend beyond mere protection
against downside risks, with a desire to seek gains also driving agent's
strategies. In this study, we showcase the potential of robust risk-aware
reinforcement learning (RL) in mitigating the risks associated with
path-dependent financial derivatives. We accomplish this by leveraging the
Jaimungal, Pesenti, Wang, Tatsat (2022) and their policy gradient approach,
which optimises robust risk-aware performance criteria. We specifically apply
this methodology to the hedging of barrier options, and highlight how the
optimal hedging strategy undergoes distortions as the agent moves from being
risk-averse to risk-seeking. As well as how the agent robustifies their
strategy. We further investigate the performance of the hedge when the data
generating process (DGP) varies from the training DGP, and demonstrate that the
robust strategies outperform the non-robust ones.Comment: 16 pages, 14 figures, 1 tabl
The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows
In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. Agents are assumed to have three components to the expectation of future asset returns, namely-fundamentalist, chartist and noise trader. Furthermore agents differ in the characteristics describing these components, such as time horizon, risk aversion and the weights given to the various components. The model developed here extends a great deal of earlier literature in that the order submissions of agents are determined by utility maximisation, rather than the mechanical unit order size that is commonly assumed. In this way the order flow is better related to the ongoing evolution of the market. For the given market structure we analyze the impact of the three components of the trading strategies on the statistical properties of prices and order flows and observe that it is the chartist strategy that is mainly responsible of the fat tails and clustering in the artificial price data generated by the model. The paper provides further evidence that large price changes are likely to be generated by the presence of large gaps in the book
Minority games, evolving capitals and replicator dynamics
We discuss a simple version of the Minority Game (MG) in which agents hold
only one strategy each, but in which their capitals evolve dynamically
according to their success and in which the total trading volume varies in time
accordingly. This feature is known to be crucial for MGs to reproduce stylised
facts of real market data. The stationary states and phase diagram of the model
can be computed, and we show that the ergodicity breaking phase transition
common for MGs, and marked by a divergence of the integrated response is
present also in this simplified model. An analogous majority game turns out to
be relatively void of interesting features, and the total capital is found to
diverge in time. Introducing a restraining force leads to a model akin to
replicator dynamics of evolutionary game theory, and we demonstrate that here a
different type of phase transition is observed. Finally we briefly discuss the
relation of this model with one strategy per player to more sophisticated
Minority Games with dynamical capitals and several trading strategies per
agent.Comment: 19 pages, 7 figure
Effects of diversification among assets in an agent-based market model
We extend to the multi-asset case the framework of a discrete time model of a
single asset financial market developed in Ghoulmie et al (2005). In
particular, we focus on adaptive agents with threshold behavior allocating
their resources among two assets. We explore numerically the effect of this
diversification as an additional source of complexity in the financial market
and we discuss its destabilizing role. We also point out the relevance of these
studies for financial decision making.Comment: 12 pages, 5 figures, accepted for publication in the Proceedings of
the Complex Systems II Conference at the Australian National University, 4-7
December 2007, Canberra, ACT Australi
Dynamics of multi-frequency minority games
The dynamics of minority games with agents trading on different time scales
is studied via dynamical mean-field theory. We analyze the case where the
agents' decision-making process is deterministic and its stochastic
generalization with finite heterogeneous learning rates. In each case, we
characterize the macroscopic properties of the steady states resulting from
different frequency and learning rate distributions and calculate the
corresponding phase diagrams. Finally, the different roles played by regular
and occasional traders, as well as their impact on the system's global
efficiency, are discussed.Comment: 9 pages, 5 figure
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