Rock around the Clock : An agent-based model of low- and high-frequency trading - HAL Accéder directement au contenu
Article dans une revue Journal of Evolutionary Economics Année : 2016

Rock around the Clock : An agent-based model of low- and high-frequency trading

Résumé

We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash crashes. In the model, low-frequency agents adopt trading rules based on chronological time and can switch between fundamentalist and chartist strategies. By contrast, high-frequency traders activation is event-driven and depends on price fluctuations. High-frequency traders use directional strategies to exploit market information produced by low-frequency traders. Monte-Carlo simulations reveal that the model replicates the main stylized facts of financial markets. Furthermore, we find that the presence of high-frequency traders increases market volatility and plays a fundamental role in the generation of flash crashes. The emergence of flash crashes is explained by two salient characteristics of high-frequency traders, i.e., their ability to i. generate high bid-ask spreads and ii. synchronize on the sell side of the limit order book. Finally, we find that higher rates of order cancellation by high-frequency traders increase the incidence of flash crashes but reduce their duration.
Loading...

Dates et versions

hal-01512863, version 1 (24-04-2017)

Identifiants

Citer

Sandrine Jacob Leal, Mauro Napoletano, Andrea Roventini, Giorgio Fagiolo. Rock around the Clock : An agent-based model of low- and high-frequency trading. Journal of Evolutionary Economics, 2016, 26 (1), pp.49-76. ⟨10.1007/s00191-015-0418-4⟩. ⟨hal-01512863⟩
74 Consultations
0 Téléchargements
Dernière date de mise à jour le 20/04/2024
comment ces indicateurs sont-ils produits

Altmetric

Partager

Gmail Facebook Twitter LinkedIn Plus