Agentic AI in Automated Markets

Irene Aldridge, Lourenco Belleau-Bhowmik, James Chan, Josh Chang, Kelly Deng, Pranav Dhingra, Xinda Ding, Haodong Fang, Satya Hanumanchi, Carter He, Shuang He, Yadong Hou, Vallab Karanam, Rithvik Kasarla, Tishya Khanna, Jihyun Kim, Sarah Konety, Abhinav Kotta, Anderson Lo, Jake Luther, Omar Mian, Ishan Patwardhan, Matteo Perona, Chenyue Qi, Shashank Ramachandran, Shubham Rateria, Jake Swain, David Thai, Michael Twersky, Susan Wu, Dean Xu, Helenna Yin and Jiachun Zheng

Papers from arXiv.org

Abstract: Automated markets increasingly host autonomous, learning trading agents and are powered by formulaic automated market makers (AMMs). We study how heterogeneous agent behavior shapes stress, risk-adjusted performance, liquidity, and volatility in these types of markets. Three behavioral archetypes are modeled as agentic reinforcement learning (RL) systems: a rational arbitrageur, a manipulator, and a retail herd-follower. Each archetype is defined by its reward function within a common, asset-agnostic exposure-control environment, and each is trained with a value-based Deep Q-Network (DQN) and with REINFORCE using a learned baseline. A pilot on hourly cryptocurrency data (AAVE, ETC, SUI) motivates the hypotheses. Herd-followers produce the most frequent but shortest stress episodes, manipulators the fewest but most persistent, and rational agents the most stable rolling Sharpe ratios despite higher return volatility. SHAP attributions tie these patterns to drawdown and cross-asset signals, short-term volatility and position state, and momentum, respectively. The results motivate behavior-specific regulation rather than uniform limits on volatility or turnover.

Date: 2026-10, Revised 2026-11
New Economics Papers: this item is included in nep-cmp
References: Add references at CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2610.22522 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2610.22522

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().