Elements of decisional dynamics: An agent-based approach applied to artificial financial market

Iris Lucas, Michel Cotsaftis and Cyrille Bertelle ()
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Iris Lucas: RI2C - LITIS - Equipe Réseaux d'interactions et Intelligence Collective - LITIS - Laboratoire d'Informatique, de Traitement de l'Information et des Systèmes - ULH - Université Le Havre Normandie - NU - Normandie Université - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - INSA Rouen Normandie - Institut national des sciences appliquées Rouen Normandie - INSA - Institut National des Sciences Appliquées - NU - Normandie Université
Michel Cotsaftis: ECE Paris
Cyrille Bertelle: RI2C - LITIS - Equipe Réseaux d'interactions et Intelligence Collective - LITIS - Laboratoire d'Informatique, de Traitement de l'Information et des Systèmes - ULH - Université Le Havre Normandie - NU - Normandie Université - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - INSA Rouen Normandie - Institut national des sciences appliquées Rouen Normandie - INSA - Institut National des Sciences Appliquées - NU - Normandie Université

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Abstract: This paper introduces an original mathematical description for describing agents' decision-making process in the case of problems affected by both individual and collective behaviors in systems characterized by nonlinear, path dependent, and self-organizing interactions. An application to artificial financial markets is proposed by designing a multi-agent system based on the proposed formalization. In this application, agents' decision-making process is based on fuzzy logic rules and the price dynamics is purely deterministic according to the basic matching rules of a central order book. Finally, while putting most parameters under evolutionary control, the computational agent-based system is able to replicate several stylized facts of financial time series (distributions of stock returns showing a heavy tail with positive excess kurtosis, absence of autocorrelations in stock returns, and volatility clustering phenomenon).

Date: 2018-02
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Published in Chaos: An Interdisciplinary Journal of Nonlinear Science, 2018, 28 (2), pp.023114. ⟨10.1063/1.5010185⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02114930

DOI: 10.1063/1.5010185

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