dorsal/arxiv
View SchemaNews and price returns from threshold behaviour and vice-versa: exact solution of a simple agent-based market model
| Authors | Damien Challet |
|---|---|
| Categories | |
| ArXiv ID | physics/0510257 |
| URL | https://arxiv.org/abs/physics/0510257 |
| DOI | 10.1088/0305-4470/39/48/001 |
Abstract
Starting from an exact relationship between news, threshold and price return distributions in the stationary state, I discuss the ability of the Ghoulmie-Cont-Nadal model of traders to produce fat-tailed price returns. Under normal conditions, this model is not able to transform Gaussian news into fat-tailed price returns. When the variance of the news so small that only the players with zero threshold can possibly react to news, this model produces Levy-distributed price returns with a -1 exponent. In the special case of super-linear price impact functions, fat-tailed returns are obtained from well-behaved news.
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"abstract": "Starting from an exact relationship between news, threshold and price return\ndistributions in the stationary state, I discuss the ability of the\nGhoulmie-Cont-Nadal model of traders to produce fat-tailed price returns. Under\nnormal conditions, this model is not able to transform Gaussian news into\nfat-tailed price returns. When the variance of the news so small that only the\nplayers with zero threshold can possibly react to news, this model produces\nLevy-distributed price returns with a -1 exponent. In the special case of\nsuper-linear price impact functions, fat-tailed returns are obtained from\nwell-behaved news.",
"arxiv_id": "physics/0510257",
"authors": [
"Damien Challet"
],
"categories": [
"physics.soc-ph",
"cond-mat.stat-mech",
"q-fin.TR"
],
"doi": "10.1088/0305-4470/39/48/001",
"title": "News and price returns from threshold behaviour and vice-versa: exact solution of a simple agent-based market model",
"url": "https://arxiv.org/abs/physics/0510257"
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