Strategic Agent-Based Modeling of Financial Markets

Strategic Agent-Based Modeling of Financial Markets

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Understanding the implications of algorithmic trading calls for modeling financial markets at a level of fidelity that often precludes analytic solution.We Brushes describe how agent-based simulation modeling can be combined with game-theoretic reasoning to examine the effects of market variables on outcomes of interest.The approach is illustrated in a basic model where investors trade a single security through a continuous double auction mechanism.Our results demonstrate the feasibility of the approach, and raise questions about the use of spreads as a proxy for trading cost Cyclist Accessories - Clothing - Jerseys and welfare.