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Complexity and model comparison in agent based modeling of financial markets

Author

Listed:
  • Alexandru Mandes

    (University of Giessen)

  • Peter Winker

    (University of Giessen)

Abstract

Agent based models of financial markets follow different approaches and might be categorized according to major building blocks used. Such building blocks include agent design, agent evolution and the price finding mechanism. The performance of agent based models in matching key features of real market processes depends on how these building blocks are selected and combined. For model comparison, both measures of model fit and model complexity are required. Some suggestions are made on how to measure complexity of agent based models. An application for the foreign exchange market illustrates the potential of this approach.

Suggested Citation

  • Alexandru Mandes & Peter Winker, 2017. "Complexity and model comparison in agent based modeling of financial markets," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(3), pages 469-506, October.
    • Handle: RePEc:spr:jeicoo:v:12:y:2017:i:3:d:10.1007_s11403-016-0173-0
    DOI: 10.1007/s11403-016-0173-0
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    6. Alexandru Mandes, 2020. "Impact of Electronic Liquidity Providers Within a High-Frequency Agent-Based Modeling Framework," Computational Economics, Springer;Society for Computational Economics, vol. 55(2), pages 407-450, February.
    7. Barde, Sylvain, 2016. "Direct comparison of agent-based models of herding in financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 329-353.
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    More about this item

    Keywords

    Agent based modeling; Complexity; Model selection;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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