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Automatizing Price Negotiation in Commodities Markets

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Author Info

  • Laib, Fodil
  • Radjef, MS

Abstract

This is an introductory work to trade automatization of the futures market, so far operated by human traders. We are not focusing on maximizing individual profits of any trader as done in many studies, but rather we try to build a stable electronic trading system allowing to obtain a fair price, based on supply and demand dynamics, in order to avoid speculative bubbles and crashes. In our setup, producers and consumers release regularly their forecasts of output and consumption respectively. Automated traders will use this information to negotiate price of the underlying commodity. We suggested a set of analytical criteria allowing to measure the efficiency of the automatic trading strategy in respect to market stability.

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File URL: http://mpra.ub.uni-muenchen.de/28277/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28277.

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Date of creation: 24 May 2010
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Handle: RePEc:pra:mprapa:28277

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Related research

Keywords: Automated Traders; Optimal Strategies; Futures Market; Commodities Trading;

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  1. Levy, Moshe, 2008. "Stock market crashes as social phase transitions," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 137-155, January.
  2. Michael J. Barclay & Terrence Hendershott & D. Timothy McCormick, 2003. "Competition among Trading Venues: Information and Trading on Electronic Communications Networks," Journal of Finance, American Finance Association, vol. 58(6), pages 2637-2666, December.
  3. Laib, Fodil & Radjef, MS, 2008. "Optimal Strategies for Automated Traders in a Producer-Consumer Futures Market," MPRA Paper 12965, University Library of Munich, Germany.
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