Agent Based Model of the E-Mini S&P 500 Future: Application for Policy Making
Proceedings of the 2012 Winter Simulation Conference
12 Pages Posted: 19 Jul 2012 Last revised: 20 Jun 2013
Date Written: 2012
An agent-based model (ABM) has a structure, which includes a set of agents, a topology and an environment. A simplified conception of a financial market includes a set of market participants, a trading mechanism, and a set of securities. In a typical ABM of a financial market, the market participants are agents, the market mechanism is the topology and the exogenous flow of information into the market is the environment. A zero-intelligence ABM model of the E-Mini Futures Market is presented. Several classes of agents are characterized by their speed and placement of orders within the limit order book. The proposed minimum quote life rule is implemented in the simulation. The minimum quote life rule prevents new orders from being cancelled or modified before a given time limit. Through experimentation, trade-off curves are generated. Thereby, illustrating the usefulness of this ABM and its ability to inform ongoing financial policy debates.
Keywords: Agent Based Model, Agent, E-MINI S&P 500, Minimum Quote Life, Policy, Rule Making
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