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Heterogeneous beliefs and and routes to complez dynamics in asset pricing models with price contingent contracts

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  • Brock, W.A.

    (University of Wisconsin)

  • Hommes, C.H.

    ()
    (Universiteit van Amsterdam)

Abstract

This paper discusses dynamic evolutionary multi-agent systems, as introduced by Brock and Hommes (1997). In particular the heterogeneous agent dynamic asset pricing model of Brock and Hommes (1998) is extended by introducing derivative securities by means of price contingent contracts. Numerical simulations suggest that in a boundedly rational heterogeneous evolutionary world futures markets may be destabilizing.

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File URL: http://www1.fee.uva.nl/cendef/publications/papers/BHSSRI.pdf
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Bibliographic Info

Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 01-05.

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Date of creation: 2001
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Handle: RePEc:ams:ndfwpp:01-05

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Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
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Web page: http://www.fee.uva.nl/cendef/
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References

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  1. Brock,W.A. & Hommes,C.H., 2001. "Evolutionary dynamics in financial markets with many trader types," Working papers, Wisconsin Madison - Social Systems 7, Wisconsin Madison - Social Systems.
  2. Brock, W.A. & Hommes, C.H., 1996. "A Rational Route to Randomness," Working papers, Wisconsin Madison - Social Systems 9530r, Wisconsin Madison - Social Systems.
  3. repec:att:wimass:9621 is not listed on IDEAS
  4. de Fontnouvelle, Patrick, 2000. "Information Dynamics In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 4(02), pages 139-169, June.
  5. Gaunersdorfer, A. & Hommes, C.H., 2005. "A nonlinear structural model for volatility clustering," CeNDEF Working Papers, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance 05-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  6. Cars H. Hommes, 2001. "Financial Markets as Nonlinear Adaptive Evolutionary Systems," Tinbergen Institute Discussion Papers 01-014/1, Tinbergen Institute.
  7. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, Elsevier, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
  8. Brock, W.A., 1990. "Overlapping generations models with money and transactions costs," Handbook of Monetary Economics, Elsevier, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 7, pages 263-295 Elsevier.
  9. William A. Brock & Patrick de Fontnouvelle, 1996. "Expectational Diversity in Monetary Economies," Working Papers, Santa Fe Institute 96-11-084, Santa Fe Institute.
  10. David K. Levine & William Zame, 2001. "Does Market Incompleteness Matter," Levine's Working Paper Archive 78, David K. Levine.
  11. Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 16(3-4), pages 451-489.
  12. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 22(8-9), pages 1235-1274, August.
  13. Roger Guesnerie, 2001. "Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262072076, December.
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