12.5 REFERENCES FOR FURTHER READING
Reviews [1, 5] and the recent collection [6] might be a good starting
point for deeper insight into this quickly evolving field.
12.6 EXERCISES
**
1. Discuss the derivation of the GARCH process with the agent-
based model [21].
**
2. Discuss the insider trading model [22]. How would you model
agents having knowledge of upcoming large block trades?
**
3. Discuss the parsimony problem in agent-based modeling of
financial markets (use [16] as the starting point).
**
4. Discuss the agent-based model of business growth [23].
**
5. Verify if the model (12.4.1)–(12.4.7) exhibits a price distribu-
tion with fat tails.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0246810121416
Time
n/no
1
2
3
Figure 12.4 Dynamics of the number of traders described with equation
(12.4.19) with a ¼ 0.25, b ¼ 1, n
þ
(0) ¼ 0.2, and n
(0) ¼ 0.1: 1 - c ¼ 1; 2 - c ¼
10; 3 - c ¼ 20.
Agent-Based Modeling of Financial Markets 143
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