Adding to the Regulator's Toolbox: Integration and Extension of Two Leading Market Models

Abstract

As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability. Our model builds upon two leading market models: one which emphasizes market micro-structure and another which emphasizes an ecology of trading strategies. We address a limitation of market modeling, namely the consideration of only one dominant trading strategy (i.e., long positions). Our model aligns closely with several widely held stylized facts of financial markets. And a final contribution of this work stems from our empirical analysis of the fractal nature of both empirical markets and our market model.

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Document Details

Document Type
Technical Report
Publication Date
Nov 08, 2010
Accession Number
AD1108461

Entities

People

  • Brian F Tivnan
  • Matthew Mcmahon
  • Matthew Olsen
  • Matthew T. Koehler
  • Neal J. Rothleder
  • Rajani R. Shenoy

Organizations

  • MITRE Corporation
  • Santa Fe Institute

Tags

Communities of Interest

  • Energy and Power Technologies
  • Materials and Manufacturing Processes

DTIC Thesaurus Topics

  • Agent-Based Simulations
  • Algorithms
  • Autocorrelation
  • Commerce
  • Complex Systems
  • Computations
  • Corporations
  • Data Set
  • Data Sets
  • Digital Data
  • Dynamics
  • Engineering
  • Feedback
  • Genetic Algorithms
  • Normal Distribution
  • Random Walk
  • Simulations
  • Spectra
  • Statistics
  • Systems Engineering
  • Validation
  • Volatility

Fields of Study

  • Economics

Readers

  • Computational Fluid Dynamics (CFD)
  • International Relations and European Studies
  • Organizational Process Management (OPM).