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Modelling an Artificial Financial Market: Agent Based Approach

Author

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  • Hidayet Beyhan

    (Istanbul Technical University)

  • Burç Ülengin

    (Istanbul Technical University)

Abstract

A primitive agent-based artificial financial market is created based on the Genoa market model introduced by Raberto et al., (2001). We aim to replicate the stylized fact of financial asset returns to assure validity of model. Agents are endowed with prespecified cash and assets amount. Agents based simulation is run under different scenarios and results are examined. Agents differ when trading as being noise trader or an agent using technical trading. The model was able to replicate leptokurtic shape of probability density function, absence of autocorrelation and volatility clustering.

Suggested Citation

  • Hidayet Beyhan & Burç Ülengin, 2021. "Modelling an Artificial Financial Market: Agent Based Approach," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 36(Special2), pages 71-96, January.
    • Handle: RePEc:acc:malfin:v:36:y:2021:i:special2:p:71-96
    DOI: https://doi.org/10.33203/mfy.849275
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    More about this item

    Keywords

    Artificial Financial Market; Agent Based Model; Heterogenous Agents;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G1 - Financial Economics - - General Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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