In this paper, we present an extension of the Genoa artificial stock market GASM) (Raberto et al., 2001) that includes a limit order book as mechanism for price formation. At every time step an agent is chosen with uniform distribution to issue an order. The order can be a limit order or a market order. If the order is a limit order, it is stored in the book; if the order is a market order, a transaction occurs. Prices are formed at variable time steps, i.e., only when a market order is issued. We investigate how the new asynchronous trading mechanism affects the statistical properties of simulated prices. This computational experiment shows that the fat tails of the returns distribution can be recovered simply as a consequence of the limit order book without any additional assumption on agents' behavior.

Price formation in an artificial market: limit order book versus matching of supply and demand

MARCHESI, MICHELE
2004

Abstract

In this paper, we present an extension of the Genoa artificial stock market GASM) (Raberto et al., 2001) that includes a limit order book as mechanism for price formation. At every time step an agent is chosen with uniform distribution to issue an order. The order can be a limit order or a market order. If the order is a limit order, it is stored in the book; if the order is a market order, a transaction occurs. Prices are formed at variable time steps, i.e., only when a market order is issued. We investigate how the new asynchronous trading mechanism affects the statistical properties of simulated prices. This computational experiment shows that the fat tails of the returns distribution can be recovered simply as a consequence of the limit order book without any additional assumption on agents' behavior.
Financial Markets; Heterogenous Agents
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11584/15758
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 9
  • ???jsp.display-item.citation.isi??? ND
social impact