Multi-agent-based Order Book Model of financial marketsT. Preis, S. Golke, W. Paul and J. J. Schneider
Institute of Physics, Johannes Gutenberg University of Mainz Staudinger Weg 7, 55099 Mainz, Germany
received 16 May 2006; accepted 20 June 2006
published online 5 July 2006
We introduce a simple model for simulating financial markets, based on an order book, in which several agents trade one asset at a virtual exchange continuously. For a stationary market the structure of the model, the order flow rates of the different kinds of order types and the used price time priority matching algorithm produce only a diffusive price behavior. We show that a market trend, i.e. an asymmetric order flow of any type, leads to a non-trivial Hurst exponent for the price development, but not to "fat-tailed" return distributions. When one additionally couples the order entry depth to the prevailing trend, also the stylized empirical fact of "fat tails" can be reproduced by our Order Book Model.
89.65.Gh - Economics; econophysics, financial markets, business and management.
05.10.Ln - Monte Carlo methods.
02.50.Ey - Stochastic processes.
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