Strategic Agent-Based Modeling of Financial Markets

Strategic Agent-Based Modeling of Financial Markets

Blog Article

Understanding Breakfast the implications of algorithmic trading calls for modeling financial markets at a level of fidelity that often precludes analytic solution.We describe how agent-based simulation modeling can be combined with game-theoretic reasoning to examine the effects of market variables on outcomes of interest.The approach is illustrated in a basic model where investors trade a single security through a continuous double auction mechanism.Our Dot Matrix Printer results demonstrate the feasibility of the approach, and raise questions about the use of spreads as a proxy for trading cost and welfare.