THE OPINION GAME: STOCK PRICE EVOLUTION FROM MICROSCOPIC MARKET MODELING

DOI10.1142/S0219024906003421MaRDI QIDQ3379412zbMATH OpenOpenAlexFDO

Authors Anton Bovier, Jiří Černý, Ostap Hryniv

Publication date 6 April 2006

Published in International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cond-mat/0401422

zbMATH Keywords

financial marketsstatistical mechanicsstochastic dynamics

Mathematics Subject Classification ID

Applications of game theory (91A80) Auctions, bargaining, bidding and selling, and other market models (91B26)

Abstract: We propose a class of Markovian agent based models for the time evolution of a share price in an interactive market. The models rely on a microscopic description of a market of buyers and sellers who change their opinion about the stock value in a stochastic way. The actual price is determined in realistic way by matching (clearing) offers until no further transactions can be performed. Some analytic results for a non-interacting model are presented. We also propose basic interaction mechanisms and show in simulations that these already reproduce certain particular features of prices in real stock markets.

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Cites work

• Auctions as algorithms. Computerized trade execution and price discovery
• Market Behavior in a Clearing House
• Order flow and the bid-ask spread: an empirical probability model of screen-based trading
• Stock price fluctuation as a diffusion in a random environment
• The pricing of options and corporate liabilities

Cited in

(6)

• Order execution probability and order queue in limit order markets
• Simulations of evolutionary models of a stock market
• Probabilistic aspects of finance
• Modelling high-frequency limit order book dynamics with support vector machines
• scientific article; zbMATH DE number 5589330 (Why is no real title available?)
• Stock market dynamics created by interacting agents

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