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Price Dynamics under the Information-Based Dealer Model

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DOI: 10.4236/jmf.2019.94037    95 Downloads   229 Views

ABSTRACT

We investigate the stochastic behavior of the transaction price process formed by the information-based dealer model. We extend two-agent model of Nadi Serhan Aydın to multi-agent case to see the effect of the market size and noise correlations. Applying the Monte Carlo method, our numerical findings are summarized as 1) volatility of the transaction price depends on both of the noise correlation and the market size, 2) the price process has a long term memory and its Hurst extend depends on both of the noise correlation and the market size.

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Fukuda, K. , Kondo, K. and Takada, H. (2019) Price Dynamics under the Information-Based Dealer Model. Journal of Mathematical Finance, 9, 726-746. doi: 10.4236/jmf.2019.94037.

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