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An asynchronous double auction market to study the formation of financial bubbles and crashes

Benhammada, Sadek and Amblard, Frédéric and Chikhi, Salim An asynchronous double auction market to study the formation of financial bubbles and crashes. (2017) New Generation Computing, 35 (2). 129-156. ISSN 0288-3635

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Official URL: https://doi.org/10.1007/s00354-017-0010-6

Abstract

Stock market is a complex system composed from heterogeneous traderswith highly non-linear interactions from which emerge a phenomenon of specula-tive bubble. To understand the role of heterogeneous behaviors of traders andinteractions between them in the emergence of bubbles, we propose an agent-basedmodel of double auction market, with asynchronous time management, where tra-ders act asynchronously and take different times to make decisions. The market is populated by heterogeneous traders. In addition to fundamentalist, noise, and technical (chartist) traders, we propose a hybrid trader, which can switch between technical (chartist) and fundamentalist strategies integrating panicking behavior. We find that when market is populated by a majority of hybrid traders, we observequite realistic bubble formation characterized by a boom phase when hybrid tradersswitch to technical behavior, followed by a relatively shorter burst phase whenhybrid traders return to fundamentalist strategy and change to panicked state. The aim is to design agents which act asynchronously, with simple behaviors, but complex enough to produce realistic price dynamics, which provide a basis fordeveloping agents with sophisticated decision-making processes.

Item Type:Article
HAL Id:hal-02538633
Audience (journal):International peer-reviewed journal
Uncontrolled Keywords:
Institution:French research institutions > Centre National de la Recherche Scientifique - CNRS (FRANCE)
Université de Toulouse > Institut National Polytechnique de Toulouse - Toulouse INP (FRANCE)
Université de Toulouse > Université Toulouse III - Paul Sabatier - UT3 (FRANCE)
Université de Toulouse > Université Toulouse - Jean Jaurès - UT2J (FRANCE)
Université de Toulouse > Université Toulouse 1 Capitole - UT1 (FRANCE)
Other partners > Université Constantine 2 Abdelhamid Mehri (ALGERIA)
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Deposited On:27 Mar 2020 10:16

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