Artificial Economics: Agent-Based Methods in Finance, Game by Philippe Mathieu, Bruno Beaufils, Olivier Brandouy

By Philippe Mathieu, Bruno Beaufils, Olivier Brandouy

Agent-based Computational Economics (ACE) is a brand new self-discipline of economics, mostly grounded on thoughts like evolution, auto-organisation and emergence: it intensively makes use of desktop simulations in addition to synthetic intelligence, more often than not in response to multi-agents platforms. the aim of this publication is to provide an up-to date view of the medical creation within the fields of Agent-based Computational Economics (mainly in marketplace Finance and online game Theory). according to communications given at AE'2005 (Lille, USTL, France), this publication deals a large landscape of contemporary advances in ACE (both theoretical and methodological) that may curiosity lecturers in addition to practitioners.

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K agents must be parasitic on the intelligent agents to trade and to obtain profit. If all traders in the market are K agents no trade will take place. Although learning and the convergence to the Nash Equilibrium have been widely studied (Kirman [6]), there are few applications to the analysis of learning strategies in a CDA market (Walsh et al [15]). Walsh et al [15] found two Nash equilibria points when these three types agents (GD, K and ZIP) rival each other in a CDA market and their agents strategies are fixed by the modeller.

Bouchaud. Bubbles, crashes and intermittency in agent based market models. The European PhysicalJournal B, 31:421-537, 2003. 9. B. I. Jacobs, K. N. Levy, and H. Markowitz. Financial market simulations. Journal of Portfolio Management, 30th Anniversary, 2004. 10. G. Kim and H. Markowitz. Investment rules, margin, and market volatility. Journal of Portfolio Management, 16(l):45-52, 1989. 11. D. Kahneman and A. Tversky. Prospect theory: An analysis of decision under risk. Econometrica, 47(2):263-292, 1979.

Here the standard deviation is greater than the one observed on the complete sample. A bubble is hence characterized by a great deviation between the stock price and its fundamental value during a long time range. This typical dynamic, obtained with 75% of speculators and 25% of fundamentalists, can be found with other sets of parameters as long as speculator agents proportion is great (> 70%). In the speculative regime (when speculators compose the main part of population), we obtain a highly volatile price dynamic with bubbles and crashes.

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