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Order Book on Financial Networks

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Network Theory and Agent-Based Modeling in Economics and Finance

Abstract

This chapter presents results from a class of agent-based models describing a realistic financial order book, aiming to discuss some aspects related to market stability. Major empirical regularities of data are correctly replicated and simulations are used to infer possible policy implications. After a detailed explanation of model features, an application to networks is presented to advance intuitions about the role of social interaction on induced imitation and herding phenomena. Thus, the initial market structure is augmented by a dynamic multiplex with two layers devoted to information and trading. The first one, representing social interactions, is designed according to different topologies in order to show how investors decide their behavior by following perceived informative flows. The second one, where the central hub is the market maker (i.e., the owner of the venue holding the order book) is devoted to the execution of all transactions. Some policy implications oriented to foster market stability are finally provided.

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Authors and Affiliations

  1. Department of Economics and Business, University of Catania, Corso Italia 55, 95129, Catania, Italy

    Alessio Emanuele Biondo

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  1. Alessio Emanuele Biondo
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Editors and Affiliations

  1. Indian Institute of Management Ahmedabad, Ahmedabad, Gujarat, India

    Anindya S. Chakrabarti

  2. College of Liberal Arts, International Christian University, Tokyo, Japan

    Lukáš Pichl

  3. Division of Social Sciences, International Christian University, Mitaka, Tokyo, Japan

    Taisei Kaizoji

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Biondo, A.E. (2019). Order Book on Financial Networks. In: Chakrabarti, A., Pichl, L., Kaizoji, T. (eds) Network Theory and Agent-Based Modeling in Economics and Finance. Springer, Singapore. https://doi.org/10.1007/978-981-13-8319-9_5

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