A detailed heterogeneous agent model for a single asset financial market with trading via an order book

Authored by Navarro Roberto Mota, Hernan Larralde

Date Published: 2017

DOI: 10.1371/journal.pone.0170766

Sponsors: National Council of Science and Technology (CONACYT)

Platforms: No platforms listed

Model Documentation: Other Narrative

Model Code URLs: Model code not found

Abstract

We present an agent based model of a single asset financial market that is capable of replicating most of the non-trivial statistical properties observed in real financial markets, generically referred to as stylized facts. In our model agents employ strategies inspired on those used in real markets, and a realistic trade mechanism based on a double auction order book. We study the role of the distinct types of trader on the return statistics: specifically, correlation properties (or lack thereof), volatility clustering, heavy tails, and the degree to which the distribution can be described by a log-normal. Further, by introducing the practice of ``profit taking{''}, our model is also capable of replicating the stylized fact related to an asymmetry in the distribution of losses and gains.
Tags
emergence Long memory Distributions Power Volatility law Stock returns Rules Impact Price fluctuations