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From the simplest price formation models to paradigm of agent-based computational finance: a first step

  • Takashi Yamada
  • Takao Terano
Conference paper
Part of the Springer Series on Agent Based Social Systems book series (ABSS, volume 6)

Abstract

This paper studies similarities and differences between models based on Monte-Carlo method by focusing on so-called “stylized facts.” In this study, we propose a model based on evolutionary algorithm and take the other model based on statistical physics. For this purpose, first we present a genetic learning model of investor sentiment and then several ordinary time series analyses are conducted after generating sample paths. Finally, the price properties are compared to those in the Ising spin model. Our results show that both the Monte-Carlo simulations seem to lead to similar dynamics reported in real markets in that the agents are boundedly rational or have some biases towards the market. However, other time series properties are apparently different since the algorithm of price formation is different.

Keywords

Unit Root Stylize Fact Hurst Exponent Price Movement Foreign Exchange Market 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer 2009

Authors and Affiliations

  • Takashi Yamada
    • 1
  • Takao Terano
    • 1
  1. 1.Department of Computational Intelligence and System ScienceTokyo Institute of TechnologyKanagawaJapan

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