Order Book, Financial Markets and Self-Organized Criticality

Alessio Emanuele Biondo, Alessandro Pluchino and Andrea Rapisarda

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Abstract: We present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining trading decisions, while fruitfully replicates typical aggregate market behavior as the "self-fulfilling prophecy". We also address the role of random traders as a possible decentralized solution to dampen market fluctuations.

Date: 2016-02
New Economics Papers: this item is included in nep-fmk and nep-mst
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Citations: View citations in EconPapers (6)

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