Market response to external events and interventions in spherical minority games

Details Market response to external events and interventions in spherical minority games Market response to external events and interventions in spherical minority games

2008-05-06

arxiv.org/abs/0805.0746v1

Economy

Quantitative Finance

Trading and Market Microstructure

14 pages LaTeX, 5 (composite) postscript figures, submitted to Journal of Physics A

Scientific paper

10.1088/1751-8113/41/36/365002

We solve the dynamics of large spherical Minority Games (MG) in the presence of non-negligible time dependent external contributions to the overall market bid. The latter represent the actions of market regulators, or other major natural or political events that impact on the market. In contrast to non-spherical MGs, the spherical formulation allows one to derive closed dynamical order parameter equations in explicit form and work out the market's response to such events fully analytically. We focus on a comparison between the response to stationary versus oscillating market interventions, and reveal profound and partially unexpected differences in terms of transition lines and the volatility.

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