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The Opinion Game: Stock Price Evolution From Microscopic Market Modeling

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  • ANTON BOVIER

    (Weierstraß–Institut für Angewandte Analysis und Stochastik, Mohrenstraße 39, 10117 Berlin, Germany;
    Institut für Mathematik, Technische Universität Berlin, Straße des 17. Juni, 136, 10623 Berlin, Germany)

  • JIŘÍ ČERNÝ

    (Weierstraß–Institut für Angewandte Analysis und Stochastik, Mohrenstraße 39, 10117 Berlin, Germany)

  • OSTAP HRYNIV

    (Department of Mathematical Sciences, University of Durham, South Rd, Durham DH1 3LE, United Kingdom)

Abstract

We propose a class of Markovian agent based models for the time evolution of a share price in an interactive market. The models rely on a microscopic description of a market of buyers and sellers who change their opinion about the stock value in a stochastic way. The actual price is determined in realistic way by matching (clearing) offers until no further transactions can be performed. Some analytic results for simple special cases are presented. We also propose basic interaction mechanisms and show in simulations that these already reproduce certain particular features of prices in real stock markets.

Suggested Citation

  • Anton Bovier & Jiří Černý & Ostap Hryniv, 2006. "The Opinion Game: Stock Price Evolution From Microscopic Market Modeling," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 91-111.
    • Handle: RePEc:wsi:ijtafx:v:09:y:2006:i:01:n:s0219024906003421
    DOI: 10.1142/S0219024906003421
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    References listed on IDEAS

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    Cited by:

    1. Alexander Weiss, 2009. "Executing large orders in a microscopic market model," Papers 0904.4131, arXiv.org, revised Jan 2010.
    2. Rama Cont & Sasha Stoikov & Rishi Talreja, 2010. "A Stochastic Model for Order Book Dynamics," Operations Research, INFORMS, vol. 58(3), pages 549-563, June.
    3. Alexander Weiss, 2008. "Escaping the Brownian stalkers," Papers 0803.3590, arXiv.org.
    4. Hans Follmer & Alexander Schied, 2013. "Probabilistic aspects of finance," Papers 1309.7759, arXiv.org.

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