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Liquidity Drivers in Illiquid Markets: Evidence from Simulation Environments with Heterogeneous Agents

Author

Listed:
  • Lars Fluri

    (Wirtschaftswissenschaftliche Fakultät, Universität Basel, Peter Merian-Weg 6, 4052 Basel, Switzerland)

  • Ahmet Ege Yilmaz

    (Institut für Finanzdienstleistungen Zug IFZ, Hochschule Luzern, Suurstoffi 1, 6343 Rotkreuz, Switzerland)

  • Denis Bieri

    (Institut für Finanzdienstleistungen Zug IFZ, Hochschule Luzern, Suurstoffi 1, 6343 Rotkreuz, Switzerland)

  • Thomas Ankenbrand

    (Institut für Finanzdienstleistungen Zug IFZ, Hochschule Luzern, Suurstoffi 1, 6343 Rotkreuz, Switzerland)

  • Aurelio Perucca

    (MARK Investment Holding AG, Splint Invest, Unter Altstadt 30, 6300 Zug, Switzerland)

Abstract

This study investigates the liquidity dynamics in non-traditional financial markets by simulating trading environments for fractional ownership of illiquid alternative investments, grounded in empirical tick data from a Swiss FinTech platform covering December 2022 to June 2024. The research translates an operational digital secondary market into a heterogeneous agent-based simulation model within the theoretical framework of market microstructure and complex systems theory. The main objective is to assess whether a simple agent-based model (ABM) can replicate empirical liquidity patterns and to evaluate how market rules and parameter changes influence simulated liquidity distributions. The findings show that (i) the simulated liquidity closely matches empirical distributions not only in mean and variance but also in higher-order moments; (ii) the ABM reproduces key stylized facts observed in the data; and (iii) seemingly simple interventions in market rules can have unintended consequences on liquidity due to the complex interplay between agent behavior and trading mechanics. These insights have practical implications for digital platform designers, investors, and regulators, highlighting the importance of accounting for agent heterogeneity and endogenous market dynamics when shaping secondary market structures.

Suggested Citation

  • Lars Fluri & Ahmet Ege Yilmaz & Denis Bieri & Thomas Ankenbrand & Aurelio Perucca, 2025. "Liquidity Drivers in Illiquid Markets: Evidence from Simulation Environments with Heterogeneous Agents," IJFS, MDPI, vol. 13(3), pages 1-24, August.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:3:p:145-:d:1726675
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    References listed on IDEAS

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    1. Yunkyeong Seo & Zeynep Altiner & Sumin Lee & Il-Chul Moon & Tae-Sub Yun, 2025. "Finance and Market Concentration Using Agent-Based Modeling: Evidence from South Korea," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 28(3), pages 1-5.
    2. Amihud, Yakov & Mendelson, Haim & Pedersen, Lasse Heje, 2006. "Liquidity and Asset Prices," Foundations and Trends(R) in Finance, now publishers, vol. 1(4), pages 269-364, February.
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