An Agent Based Model of the E-Mini S&P 500 and the Flash Crash

8 Pages Posted: 23 Sep 2011 Last revised: 18 Jul 2012

See all articles by Mark E. Paddrik

Mark E. Paddrik

Government of the United States of America - Office of Financial Research

Roy Hayes

University of Virginia

Andrew Todd

University of Virginia

Steve Y. Yang

Stevens Institute of Technology

William Scherer

IEEE Intelligent Transportation Systems Society

Peter Beling

University of Virginia, Dept. of System & Information Engineering

Date Written: September 22, 2011

Abstract

We propose a near zero-intelligence agent-based model of the E-Mini S&P 500 futures market that allows for a close examination of market microstructure in the context of a flash crash. Several classes of agents are characterized by how fast they trade and where they place trades in the limit order book. These agents’ orders populate the simulated market in a way consistent with real world participation rates. The simulated market is validated against important empirically observed characteristics of price returns and volatility. Additionally, to illustrate the applicability of the simulation experimental results are present, which examine the leading hypothesis for the cause of the May 6th 2010 Flash Crash.

Keywords: Agent Base, Flash Crash, S&P 500, Zero-Intelligence

Suggested Citation

Paddrik, Mark Endel and Hayes, Roy Lee and Todd, Andrew and Yang, Steve Y. and Scherer, William and Beling, Peter, An Agent Based Model of the E-Mini S&P 500 and the Flash Crash (September 22, 2011). Available at SSRN: https://ssrn.com/abstract=1932152 or http://dx.doi.org/10.2139/ssrn.1932152

Mark Endel Paddrik (Contact Author)

Government of the United States of America - Office of Financial Research ( email )

717 14th Street, NW
Washington DC, DC 20005
United States

Roy Lee Hayes

University of Virginia ( email )

United States

Andrew Todd

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

Steve Y. Yang

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

William Scherer

IEEE Intelligent Transportation Systems Society

United States

Peter Beling

University of Virginia, Dept. of System & Information Engineering ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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