On Financial Markets Trading

Details On Financial Markets Trading On Financial Markets Trading

2000-10-19

arxiv.org/abs/cond-mat/0010280v1

Physics

Condensed Matter

18 pages, submitted

Scientific paper

10.1016/S0378-4371(00)00548-3

Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has introduced realistic constraints in order to confine money, time, gain and loss within an appropriate range. The main ingredients are local and global coupling, randomness, Zipf distribution of resources and price formation when inserting an order. The simulation starts with the initial public offer and comprises the broadcasting of news/advertisements and the building of the book, where all the selling and buying orders are stored. The model is able to reproduce fat tails and clustered volatility, the two most significant characteristics of a real stockmarket, being driven by very intuitive parameters.

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