Download or read book Financial Markets Equilibrium with Heterogeneous Agents written by Jakša Cvitanić and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Markets Equilibrium with Heterogeneous Agents written by Jaksa Cvitanic and published by . This book was released on 2015 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an equilibrium model in a pure exchange economy when investors have three possible sources of heterogeneity. Investors may differ in their beliefs, in their level of risk aversion and in their time preference rate. We study the impact of investors heterogeneity on the properties of the equilibrium. In particular, we analyze the consumption shares, the market price of risk, the risk free rate, the bond prices at different maturities, the stock price and volatility as well as the stockís cumulative returns, and optimal portfolio strategies. We relate the heterogeneous economy with the family of associated homogeneous economies with only one class of investors. We consider cross sectional as well as asymptotic properties.

Download or read book Monetary Equilibrium with Heterogeneous Agents and Incomplete Financial Markets written by Jinhui Bai and published by . This book was released on 2006 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Computational Economics Heterogeneous Agent Modeling written by Cars Hommes and published by Elsevier. This book was released on 2018-06-27 with total page 836 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Computational Economics: Heterogeneous Agent Modeling, Volume Four, focuses on heterogeneous agent models, emphasizing recent advances in macroeconomics (including DSGE), finance, empirical validation and experiments, networks and related applications. Capturing the advances made since the publication of Volume Two (Tesfatsion & Judd, 2006), it provides high-level literature with sections devoted to Macroeconomics, Finance, Empirical Validation and Experiments, Networks, and other applications, including Innovation Diffusion in Heterogeneous Populations, Market Design and Electricity Markets, and a final section on Perspectives on Heterogeneity. Helps readers fully understand the dynamic properties of realistically rendered economic systems Emphasizes detailed specifications of structural conditions, institutional arrangements and behavioral dispositions Provides broad assessments that can lead researchers to recognize new synergies and opportunities

Download or read book Long Memory in Financial Markets written by Min Zheng and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: During last decades, studies on asset pricing models witnessed a paradigm shift from rational expectation and representative agent to an alternative, behavioral view, where agents are heterogeneous and boundedly rational. In this paper, we model the financial market as an interaction of two types of boundedly rational investors -fundamentalists and chartists. We examine the dynamics of the market price and market behavior, which depend on investors' behavior and the interaction of the two types of investors. Numerical simulations of the corresponding stochastic model demonstrate that the model is able to replicate the stylized facts of financial time series, in particular the long-term dependence (long memory) of asset return volatilities. We further investigate the source of the long memory according to asset pricing mechanism of our model, and provide evidences of long memory by applying the modified R/S analysis. Our results demonstrate that the key parameter that has impact on the long memory is the speed of the price adjustment of the market maker at the equilibrium of demand and supply.

Download or read book Asset Trading Volume with Dynamically Complete Markets and Heterogeneous Agents written by Kenneth L. Judd and published by . This book was released on 2000 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing in a Lucas Framework with Boundedly Rational Heterogeneous Agents written by Andrew James Culham and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: The standard dynamic general equilibrium model of financial markets does a poor job of explaining the empirical facts observed in real market data. The common assumptions of homogeneous investors and rational expectations equilibrium are thought to be major factors leading to this poor performance. In an attempt to relax these assumptions, the literature has seen the emergence of agent-based computational models where artificial economies are populated with agents who trade in stylized asset markets. Although they offer a great deal of flexibility, the theoretical community has often criticized these agent-based models because the agents are too limited in their analytical abilities.

Download or read book Modeling Financial Markets with Heterogeneous Interacting Agents written by and published by . This book was released on 2007 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market has been extensively recognized as a complex system, where large number of heterogeneous agents contribute to price formation of asset. Interactions and adaptations of these agents form the core foundation of market operations and its resultant characteristic properties. These market agents are highly diverse in their perception of the world around them and in the way they respond to it. Various studies of statistical properties of financial markets and price fluctuations have revealed a rich set of typical characteristics knows as stylized facts. Agent-based models that can reproduce these stylized facts and explain the roots of complex dynamics of financial market have been subject of intense research in recent time. The Minority Game Model proposed by Challet and Zhang is one such model that presents a simplified paradigm of financial market. Another model proposed by Lux and Marchesi offers a different perspective to agent-based modeling, where parallels are drawn between the physical system with a large number of interacting units and financial markets. The Minority Game model succeeds to a certain extent in reproducing stylized facts and explaining behavioral foundation of it. However, in attempt to present a simplified picture of market scenario both these models make certain assumptions that dilute the heterogeneity aspect of the real market. In real world markets, agents are truly diverse in their thinking, strategy, action and analyzing ability. Due to these unrealistic assumptions, the model can be validated only with a very limited spectrum of parameters. Also, it's difficult to point out precisely which aspects of the game contribute to some of the stylized facts producible with the model. To improve on these issues, we have developed a model and a simulator based on modified minority game, which we are referring to as "adapted minority game." The main focus of our research is on improving the heterogeneity aspect of agents, their interactions, and bringing fundamental value of asset into the Minority Game model. Our model introduces fundamentalist agents into the minority game model and also allows agents to have different historical memory and time horizons. Furthermore, agents are free to switch from one trading strategy group to another to improve their chances of performing better. Reproducing the stylized facts still remains the benchmark for validating our model. Our adapted minority game succeeds to an extent in expanding the spectrum of parameters that can be used for modeling the market. Agents' interactions and adaptations have been tracked down to the basis of stylized facts. An interesting property of periodic volatility is successfully demonstrated with our model.

Download or read book New Facets of Economic Complexity in Modern Financial Markets written by Catherine Kyrtsou and published by Routledge. This book was released on 2020-06-04 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book is motivated by the disruptions introduced by the financial crisis and the many attempts that have followed to propose new ideas and remedies. Assembling contributions by authors from a variety of backgrounds, this collection illustrates the potentials resulting from the marriage of financial economics, complexity theory and an out-of-equilibrium view of the economic world. Challenging the traditional hypotheses that lie behind financial market functioning, new evidence is provided about the hidden factors fuelling bubbles, the impact of agents’ heterogeneity, the importance of endogeneity in the information transmission mechanism, the dynamics of herding, the sources of volatility, the portfolio optimization techniques, the financial innovation and the trend identification in a nonlinear time-series framework. Presenting the advances made in financial market analysis, and putting emphasis on nonlinear dynamics, this book suggests interdisciplinary methodologies for the study of well-known stylised facts and financial abnormalities. This book was originally published as a special issue of The European Journal of Finance.

Download or read book Asset Market Dynamics of Heterogeneous Agent Models with Learning written by Yuanying Guan and published by . This book was released on 2011 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: The standard Lucas asset pricing model makes two common assumptions of homogeneous agents and rational expectations equilibrium. However, these assumptions are unrealistic for real financial markets. In this work, we relax these assumptions and establish a Lucas type agent-based asset pricing model. We create an artificial economy with a single risky asset and populate it with heterogeneous, boundedly rational, utility maximizing, infinitely lived and forward looking agents. We restrict agents' information by allowing them to use only available information when they make optimal choices. With independent, identically distributed market returns, agents are able to compute their policy functions and the equilibrium pricing function with Duffie's method (Duffie, 1988) without perfect information about the market. When agents are out of equilibrium, they simultaneously compute their policy functions with predictive pricing functions and use adaptive learning schemes to learn the motion of the correct pricing function. Agents are able to learn the correct equilibrium pricing function with certain risk and learning parameters. In some other cases, the market price has excess volatility and the trading volume is very high. Simulations of the market behavior show rich dynamics, including a whole cascade from period doubling bifurcations to chaos. We apply the full families theory (De Melo and Van Strien, 1993) to prove that the rich dynamics do not come from numerical errors but are embedded in the structure of our dynamical system.

Download or read book Heterogeneous Agents in Financial Markets written by Remco C. J. Zwinkels and published by . This book was released on 2009 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Heterogeneous Preferences and General Equilibrium in Financial Markets written by Tyler Abbot and published by . This book was released on 2015 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Heterogeneous Agents and Financial Markets written by Rodolfo Guillermo Campos and published by . This book was released on 2008 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Equilibrium Allocation of Diffusive and Jump Risks with Heterogeneous Agents written by Michael F. Gallmeyer and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a two-agent pure exchange equilibrium subject to both nondiversifiable diffusive and jump risks. Agents can trade in a financial market consisting of a stock market, a money market, and an insurance market for jump risk. Heterogeneity is introduced through different levels of relative risk aversion. In the framework of standard expected utility we find the surprising result that the less risk averse agent purchases insurance contracts against jump risk from the more risk averse agent. This equilibrium allocation is linked to the non-linear wealth sharing rule in such an economy, and preserves the wealth effects studied by Dumas (1989) in the case of pure diffusive risk. Since the benchmark economy with homogenous agents generates no excess uncertainty in the stock market, we study the effect on excess volatility and excess jump size solely due to different levels of relative risk aversion. We observe 3% excess uncertainty in jump sizes for a reasonable specification of economic fundamentals.

Download or read book Equilibrium Pricing in Incomplete Markets Under Translation Invariant Preferences written by and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide results on the existence and uniqueness of equilibrium in dynamically incomplete financial markets in discrete time. Our framework allows for heterogeneous agents, unspanned random endowments and convex trading constraints. In the special case where all agents have preferences of the same type and all random endowments are replicable by trading in the financial market we show that a one-fund theorem holds and give an explicit expression for the equilibrium pricing kernel. If the underlying noise is generated by finitely many Bernoulli random walks, the equilibrium dynamics can be described by a system of coupled backward stochastic difference equations, which in the continuous-time limit becomes a multi-dimensional backward stochastic differential equation. If the market is complete in equilibrium, the system of equations decouples, but if not, one needs to keep track of the prices and continuation values of all agents to solve it. As an example we simulate option prices in the presence of stochastic volatility, demand pressure and short-selling constraints. -- Competitive equilibrium ; incomplete markets ; heterogenous agents ; trading constraints ; backward stochastic difference equations

Download or read book Nonlinear Dynamics and Heterogeneous Interacting Agents written by Thomas Lux and published by Springer Science & Business Media. This book was released on 2006-06-06 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic application of nonlinear dynamics, microscopic agent-based modelling, and the use of artificial intelligence techniques as learning devices of boundedly rational actors are among the most exciting interdisciplinary ventures of economic theory over the past decade. This volume provides us with a most fascinating series of examples on "complexity in action" exemplifying the scope and explanatory power of these innovative approaches.

Download or read book Modeling Financial Markets with Heterogeneous Agents written by Steven David Baker and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: