How to Estimate Market Maker Models in an Artificial Market
In this chapter, market makers and their estimation will be demonstrated as one example of an application using an artificial market. Three kinds of simple market maker models, which decide ask and bid prices by their own positions, are proposed and estimated by acceleration experiments and real-time experiments with human in an artificial market, “U-Mart.” These models can accumulate profits stably or at least keep their profits fluctuating in a narrow range. These results suggest the possibility of developing a market maker algorithm working in the real market to provide enough liquidity.
KeywordsMarket Maker Geometric Brownian Motion Spot Price Real Market Order Book
- 1.A. Beltratti, S. Margarita, P. Terna, Neural Networks for Economic and Financial Modeling. Section 7 Multi-Population Models (International Thomson Computer Press, London/Boston, 1996), pp. 217–279Google Scholar
- 6.Y. Nakajima, Y. Shiozawa, Usefulness and feasibility of market maker in a thin market, in Proceedings of ICEES (International Conference Experiments in Economic Sciences), Okayama and Kyoto, pp. 1000–1003 (2004)Google Scholar
- 7.Y. Nakajima, I. Ono, N. Mori, Effect of simple market maker in artificial market, in Proceedings of WCSS06, Kyoto, vol. 1, pp. 159–166 (2006)Google Scholar