Post Flash Crash Recovery: An Agent-based Analysis
Résumé
In this paper we focus on the traders that purely rely on algorithms in their decision making and their impact on market quality during moments of instability. We describe an agent-based framework that successfully reproduces main aspects of flash crash. We simulate the effect of a large liquidity shock generated by a very aggressive market order. We show that, despite the absence of market makers, the electronic order-book architecture favors market resiliency and recovery.