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
Date Written: September 22, 2011
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: Suggested Citation