From minority game to Black \& Scholes pricing

DOI10.1080/1350486X.2013.787246MaRDI QIDQ4585003zbMATH OpenOpenAlexFDO

Authors Matteo Ortisi, Valerio Zuccolo

Publication date 5 September 2018

Published in Applied Mathematical Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1205.2521

zbMATH Keywords

agent-based modelsgrand canonical minority gamemarket calibrationminority gameoption pricing

Mathematics Subject Classification ID

Noncooperative games (91A10) Derivative securities (option pricing, hedging, etc.) (91G20)

Abstract: In this paper we study the continuum time dynamics of a stock in a market where agents behavior is modeled by a Minority Game and a Grand Canonical Minority Game. The dynamics derived is a generalized geometric Brownian motion; from the Black & Scholes formula the calibration of both the Minority Game and the Grand Canonical Minority Game, by means of their characteristic parameters, is performed. We conclude that for both games the asymmetric phase with characteristic parameters close to critical ones is coherent with options implied volatility market.

Recommendations

• Minority games and stylized facts
• From minority games to real markets
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• scientific article; zbMATH DE number 2118872
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Cited in

(3)

• Dynamical solution of the on-line minority game.
• Polynomial-Rate Convergence to the Stationary State for the Continuum-Time Limit of the Minority Game
• The cavity method for minority games between arbitrageurs on financial markets

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