An Agent-Based Model of a Pricing Process with Power Law, Volatility Clustering, and Jumps
Joint Authors
Source
Issue
Vol. 2019, Issue 2019 (31 Dec. 2019), pp.1-10, 10 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2019-02-17
Country of Publication
Egypt
No. of Pages
10
Main Subjects
Abstract EN
In this paper, we propose a new model of security price dynamics in order to explain the stylized facts of the pricing process such as power law distribution, volatility clustering, jumps, and structural changes.
We assume that there are two types of agents in the financial market: speculators and fundamental investors.
Speculators use past prices to predict future prices and only buy assets whose prices are expected to rise.
Fundamental investors attach a certain value to each asset and buy when the asset is undervalued by the market.
When the expectations of agents are exogenously driven, that is, entirely shaped by exogenous news, then they can be modeled as following a random walk.
We assume that the information related to the two types of agents in the model will arrive randomly with a certain probability distribution and change the viewpoint of the agents according to a certain percentage.
Our simulated results show that this model can simulate well the random walk of asset prices and explain the power-law tail distribution of returns, volatility clustering, jumps, and structural changes of asset prices.
American Psychological Association (APA)
Shi, Yu& Luo, Qixuan& Li, Handong. 2019. An Agent-Based Model of a Pricing Process with Power Law, Volatility Clustering, and Jumps. Complexity،Vol. 2019, no. 2019, pp.1-10.
https://search.emarefa.net/detail/BIM-1131411
Modern Language Association (MLA)
Shi, Yu…[et al.]. An Agent-Based Model of a Pricing Process with Power Law, Volatility Clustering, and Jumps. Complexity No. 2019 (2019), pp.1-10.
https://search.emarefa.net/detail/BIM-1131411
American Medical Association (AMA)
Shi, Yu& Luo, Qixuan& Li, Handong. An Agent-Based Model of a Pricing Process with Power Law, Volatility Clustering, and Jumps. Complexity. 2019. Vol. 2019, no. 2019, pp.1-10.
https://search.emarefa.net/detail/BIM-1131411
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1131411