Interactions and Markets

seminar: Evolutionary Finance: Prices from Trading Strategies

speaker: Stefan Reimann (University of Zürich)

abstract: Prices are observable entities of a financial market and are endogenously generated during the process of trading of assets on the financial market. In this paper we propose an elementary model for endogenous price formation based on economic principles combined with principles of theoretical evolution, the fundamental point of view being that the population of agents is a set of trading strategies whose interactions are due to their competition for a finite recouse, e.g. wealth. These interactions evolve during time according to the process of wealth dynamics of strategies. This process implicitly determines price returns and their distribution. Data from simulations are compared with empirical stylized facts from asset returns, such as non-linear dependencies in returns and the return distribution itself. We show that by this model price trails are generated that match statistical properties of those found in real financial data.

timetable:
Fri 19 Nov, 10:30 - 11:30, Aula Dini
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