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Derivation of ARCH(1) process from market price changes based on deterministic microscopic multi-agent

  • Aki-Hiro Sato
  • Hideki Takayasu
Conference paper
  • 200 Downloads

Summary

A model of fluctuations in the market price including many deterministic dealers, who predict their buying and selling prices from the latest price change, is developed. We show that price changes of the model is approximated by ARCH(1) process. We conclude that predictions of dealers affected by the past price changes cause the fat tails of probability density function. We believe that this study bridges stochastic processes in econometrics with multi-agent simulation approaches.

Key words

ARCH(1) artificial market microscopic macroscopic multi-agent simulation 

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Copyright information

© Springer Japan 2002

Authors and Affiliations

  • Aki-Hiro Sato
    • 1
  • Hideki Takayasu
    • 2
  1. 1.Department of Applied Mathematics and PhysicsKyoto UniversityKyotoJapan
  2. 2.Sony Computer Science LaboratoriesShinagawa-ku, TokyoJapan

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