Post on 06-May-2015
Empirical market microstructure High frequency trading activity modeling
Zero intelligent agent based models
Perm State National Research University
Arbuzov V.arbuzov@prognoz.ru
Perm R groupr-group.mifit.ru
ITE.LAB “MathEconomics” Open Course
Russia, Perm, 21 November 2013
Empirical market microstructure
Empirical market microstructure
Empirical market microstructure
Empirical market microstructure
The car is moving or standing ?
Empirical market microstructure
The car is moving or standing ?
Empirical market microstructure
The car is moving or standing ?
Empirical market microstructure
The car is moving or standing ?
?
Empirical market microstructure
Empirical market microstructure
Types of orders
Market orders Limit orders
Empirical market microstructure
Empirical market microstructure
Empirical market microstructure
Empirical market microstructure
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Long memory in order flow
Empirical market microstructure
Diagonal effect [Biais et al (1995)]
Empirical market microstructure
Types of agent in financial markets:
• Fundamental Traders
• Buy and Hold Traders
• Swing Traders
• Scalp Trading
• Arbitrageurs
• Technical analysis traders
• Break-out Traders
• Intuitive Traders
• High Frequency Traders
• News Traders
Empirical market microstructure
HFTs create exponential growth of data in financial markets
Number of orders (left) and number of trades (right) from 2008 (violet) to 2012 (red color) on USA exchengesSource: NANEX, LLC (http://www.nanex.net/aqck/2817.HTML)
High frequency trading activity modeling
High frequency trading activity modeling
Extraordinarily high-speed and sophisticated computer programs High message traffic Low latency Near-flat end-of-day net positions Short time frame for trading for establishing and liquidating positions Proprietary trading
What is HFT?
http://www.youtube.com/watch?v=GbGJsMJSWWk
High frequency trading activity modeling
Delay in quotes in USA market
Source: NANEX, LLC (http://www.nanex.net/aqck/2613.html)
High frequency trading activity modeling
Источник: NANEX, LLC (http://www.nanex.net/Research/didnothappen/didnothappen.html)
High frequency trading activity modeling
Источник: NANEX, LLC (http://www.nanex.net/aqck/2715.html)
High frequency trading activity modeling
High frequency trading activity modeling
Daniels model (2003)
Zero intelligent agent based modelsWe don’t know what “intelligence” or“rationality” are; but we do know how toexclude them
ZI modeling can be a foundation to whichmore formal models of learning are added…
Zero intelligent agent based models
Estimation of parameters
Estimation of spread
Zero intelligent agent based models
Simulation results
Daniels model
Zero intelligent agent based models
Simulation results (Daniels model)
Zero intelligent agent based models
Mike-Farmer model (2008)
Zero intelligent agent based models
Simulation results (Mike-Farmer model)