From market games to real-world markets

This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market clearing mechanisms and show that an out-of-equilibrium clearing process leads to dynamics that closely resemble real financial movements. We then show that replacing the `synthetic' price history used by these simulations with data taken from real financial time-series leads to the remarkable result that the agents can collectively learn to identify moments in the market where profit is attainable. We then employ the formalism of Bouchaud and Sornette in conjunction with agent based models to show that in general risk cannot be eliminated from trading with these models. We also show that, in the presence of transaction costs, the risk of option writing is greatly increased. This risk, and the costs, can however be reduced through the use of a delta-hedging strategy with modified, time-dependent volatility structure.Comment: Presented at APFA2 (Liege) July 2000. Proceedings: Eur. Phys. J. B Latex file + 10 .ps figs. [email protected]

Theory of the evolutionary minority game

We present a theory which describes a recently introduced model of an evolving, adaptive system in which agents compete to be in the minority. The agents themselves are able to evolve their strategies over time in an attempt to improve their performance. The present theory explicitly demonstrates the self-interaction, or so-called market impact, that agents in such systems experience

The Search for AGN in Distant Galaxy Clusters

We are undertaking the first systematic study of the prevalence of AGN activity in a large sample of high redshift galaxy clusters. Local clusters contain mainly red elliptical galaxies, and have little or no luminous AGN activity. However, recent studies of some moderate to high redshift clusters have revealed significant numbers of luminous AGN within the cluster. This effect may parallel the Butcher-Oemler effect - the increase in the fraction of blue galaxies in distant clusters compared to local clusters. Our aim is to verify and quantify recent evidence that AGN activity in dense environments increases with redshift, and to evaluate the significance of this effect. As cluster AGN are far less prevalent than field sources, a large sample of over 120 cluster fields at z > 0.1 has been selected from the Chandra archives and is being analysed for excess point sources. The size of the excess, the radial distribution and flux of the sources and the dependence of these on cluster redshift and luminosity will reveal important information about the triggering and fueling of AGN.Comment: 2 pages, to appear in proceedings of 'Multi-wavelength AGN surveys', Cozumel, 200