Econophysics of Order-driven Markets pp 109-124
Reconstructing Agents’ Strategies from Price Behavior
In the past years several Agents Based Models (ABMs) have been introduced to reproduce and interpret the main features of financial markets [7,14]. The ABMs go beyond simple differential equations with the aim of being able to address the complex phenomenology of a dynamics. This phenomenology is usually interpreted in terms of the Stylized Facts (SF) which correspond to complex correlations beyond the simple Random Walk (RW). The ABMs give the possibility to describe the intrinsic heterogeneity of the market which seems to be responsible for many of these SF [6, 12]. The main SF are the fat tails for the fluctuations of price-returns, the arbitrage condition, which implies no correlations in the price returns, and the volatility clustering which implies long memory correlations for volatility.
Unable to display preview. Download preview PDF.
- 2.Alfi, V., Cristelli, M., Pietronero, L., Zaccaria, A.: Mechanisms of self-organization and finite size effects in a minimal agent based model. J. Stat. Mech. p. P03016 (2009)Google Scholar
- 6.Bouchaud, J.P., Potters, M.: Theory of Financial Risk and Derivative Pricing: From Statistical Physics to Risk Management. Cambridge University Press (2003)Google Scholar
- 7.Challet, D., Marsili, M., Zhang, Y.C.: Minority Game: interacting agents in financial markets. Oxford University Press (2005)Google Scholar
- 12.Mantegna, R.N., Stanley, H.: An Introduction to Econophysics: Correlation and Complexity in Finance. Cambridge University Press, New York, NY, USA (2000)Google Scholar
- 14.Samanidou, E., Zschischang, E., Stauffer, D., Lux, T.: Microscopic models of financial markets. Tech. rep. (2006)Google Scholar