From Minority Game to Black&Scholes Pricing

Matteo Ortisi and Valerio Zuccolo

Applied Mathematical Finance, 2013, vol. 20, issue 6, 578-598

Abstract: In this paper, we study the continuum time dynamics of a stock in a market where agents behaviour is modelled by a Minority Game and a Grand Canonical Minority Game. The dynamics derived is a generalized geometric Brownian motion; from the Black&Scholes formula the calibration of both the Minority Game and the Grand Canonical Minority Game, by means of their characteristic parameters, is performed. We conclude that for both games the asymmetric phase with characteristic parameters close to critical ones is coherent with options implied volatility market.

Date: 2013
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DOI: 10.1080/1350486X.2013.787246

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