RT Journal Article
SR Electronic
T1 Strategic Agent-Based Modeling of Financial Markets
JF RSF: The Russell Sage Foundation Journal of the Social Sciences
FD Russell Sage Foundation
SP 104
OP 119
DO 10.7758/RSF.2017.3.1.06
VO 3
IS 1
A1 Michael P. Wellman
A1 Elaine Wah
YR 2017
UL http://www.rsfjournal.org/content/3/1/104.abstract
AB Understanding the implications of algorithmic trading calls for modeling financial markets at a level of fidelity that often precludes analytic solution. We describe how agent-based simulation modeling can be combined with game-theoretic reasoning to examine the effects of market variables on outcomes of interest. The approach is illustrated in a basic model where investors trade a single security through a continuous double auction mechanism. Our results demonstrate the feasibility of the approach, and raise questions about the use of spreads as a proxy for trading cost and welfare.