Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach
We propose a metamodel to assess simulated market stability by introducing information connectivity in an agent-based network. The market is occupied by heterogeneous agents with different behaviors, strategies, and information connectivity. A jump-diffusion process simulating events that may occur...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2017-01-01
|
| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2017/6752086 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1832558813827301376 |
|---|---|
| author | Khaldoun Khashanah Talal Alsulaiman |
| author_facet | Khaldoun Khashanah Talal Alsulaiman |
| author_sort | Khaldoun Khashanah |
| collection | DOAJ |
| description | We propose a metamodel to assess simulated market stability by introducing information connectivity in an agent-based network. The market is occupied by heterogeneous agents with different behaviors, strategies, and information connectivity. A jump-diffusion process simulating events that may occur in the market is introduced. Agents information awareness varies along with agents propensity to respond to the information jump and jump size. A jump reshuffles market positions based on agents risk preferences determined by behavior and strategy. We examine the effect of information awareness on the volatility index of the simulated market in a scale-free market network. The analysis is performed by developing five experiments wherein the first one corresponds to systemic information ignorance state. Three experiments examine the role of hubs, normal agents, and hermits in the network when intermediate combinations of agent types have information awareness. The fifth experiment corresponds to the systemic information awareness with all agents being informed. The results show that the simulated market is driven to instability in a similar manner to patterns observed in a crisis where all agents become homogeneous in information awareness of events. Hubs contribute to increased connectivity and act as amplifiers of good, bad, or inaccurate information or sentiment. |
| format | Article |
| id | doaj-art-925e4a77bcc84617ad346184096a0c96 |
| institution | Kabale University |
| issn | 1076-2787 1099-0526 |
| language | English |
| publishDate | 2017-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj-art-925e4a77bcc84617ad346184096a0c962025-02-03T01:31:35ZengWileyComplexity1076-27871099-05262017-01-01201710.1155/2017/67520866752086Connectivity, Information Jumps, and Market Stability: An Agent-Based ApproachKhaldoun Khashanah0Talal Alsulaiman1Financial Engineering, Stevens Institute of Technology, Hoboken, NJ, USAFinancial Engineering, Stevens Institute of Technology, Hoboken, NJ, USAWe propose a metamodel to assess simulated market stability by introducing information connectivity in an agent-based network. The market is occupied by heterogeneous agents with different behaviors, strategies, and information connectivity. A jump-diffusion process simulating events that may occur in the market is introduced. Agents information awareness varies along with agents propensity to respond to the information jump and jump size. A jump reshuffles market positions based on agents risk preferences determined by behavior and strategy. We examine the effect of information awareness on the volatility index of the simulated market in a scale-free market network. The analysis is performed by developing five experiments wherein the first one corresponds to systemic information ignorance state. Three experiments examine the role of hubs, normal agents, and hermits in the network when intermediate combinations of agent types have information awareness. The fifth experiment corresponds to the systemic information awareness with all agents being informed. The results show that the simulated market is driven to instability in a similar manner to patterns observed in a crisis where all agents become homogeneous in information awareness of events. Hubs contribute to increased connectivity and act as amplifiers of good, bad, or inaccurate information or sentiment.http://dx.doi.org/10.1155/2017/6752086 |
| spellingShingle | Khaldoun Khashanah Talal Alsulaiman Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach Complexity |
| title | Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach |
| title_full | Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach |
| title_fullStr | Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach |
| title_full_unstemmed | Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach |
| title_short | Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach |
| title_sort | connectivity information jumps and market stability an agent based approach |
| url | http://dx.doi.org/10.1155/2017/6752086 |
| work_keys_str_mv | AT khaldounkhashanah connectivityinformationjumpsandmarketstabilityanagentbasedapproach AT talalalsulaiman connectivityinformationjumpsandmarketstabilityanagentbasedapproach |