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Cross-Market Financial Risk Analysis: An Agent-Based Computational Finance

Author

Listed:
  • XIONG XIONG

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

  • MEI WEN

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

  • WEI ZHANG

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

  • YONG JIE ZHANG

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

Abstract

Using the method of agent-based computational finance, this paper designs ten experiments to examine the impacts of the index futures market, typical investment strategies, and different trading mechanisms on the volatility of the Chinese stock market, taking into account the behavior of investors. We have the following results. First, the volatility of the stock market decreases with the index future market and cross-market arbitrageurs. Second, different investment strategies have different effects on stock market volatility. In many cases, both market-imitating and stop-loss strategies can increase stock market volatility. Third, the mechanism of price limits for the index futures market can help to stabilize the fluctuation of the stock market.

Suggested Citation

  • Xiong Xiong & Mei Wen & Wei Zhang & Yong Jie Zhang, 2011. "Cross-Market Financial Risk Analysis: An Agent-Based Computational Finance," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 563-584.
    • Handle: RePEc:wsi:ijitdm:v:10:y:2011:i:03:n:s0219622011004464
    DOI: 10.1142/S0219622011004464
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    References listed on IDEAS

    as
    1. Hens, Thorsten & Schenk-Hoppe, Klaus Reiner (ed.), 2009. "Handbook of Financial Markets: Dynamics and Evolution," Elsevier Monographs, Elsevier, edition 1, number 9780123742582.
    2. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
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    Citations

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    Cited by:

    1. Wei, Lijian & Zhang, Wei & Xiong, Xiong & Shi, Lei, 2015. "Position limit for the CSI 300 stock index futures market," Economic Systems, Elsevier, vol. 39(3), pages 369-389.
    2. Lijian Wei & Wei Zhang & Xiong Xiong & Lei Shi, 2014. "Position-Limit Design for the CSI 300 Futures Markets," Research Paper Series 349, Quantitative Finance Research Centre, University of Technology, Sydney.

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