Re: [Swarm-Modelling] [Fwd: Re: [ABMs in finance]

[Steve Railsback]

Steve Railsback wrote:
> -------- Original Message --------
> Subject: Re: [Swarmfest2006] Keynote speakers
> Date: Fri, 21 Apr 2006 09:09:16 -0600
> From: Marcus G. Daniels <address@hidden>
>
> Btw, the idea of using ABM as tool actually trading seems potentially
> useful.  The idea would be to identify a network of traders (e.g. a
> number of large companies like Goldman Sachs, Merill Lynch, etc.) that
> would tend to show large back and forth trading patterns that would move
> the price in the short term.  Then use data mining techniques (e.g.
> CART) to identify some likely decision variables, and then study that in
> detail and build an ABM of the players reactions dependent on the

To me, that's the essence of what ABM has to offer: a way to try to 
figure out the behaviors that produce a set of observed patterns. We 
ecologists think we have a difficult problem figuring out how fish and 
plants make decisions; imagine in finance where the agent behaviors 
could be as complex as these companies' automatic trading programs.

But that's one reason Doyne's work, like the paper "Zero 
intelligence..." (http://www.santafe.edu/~jdf/papers/science2.pdf), is 
cool: it shows that you do not have to include all of this tremendous 
complexity to make a model that explains some important patterns. Some 
patterns seem to emerge just from the trading rules.

As an outsider, I would think people in finance would be busy figuring 
out how much "realism" they need in agent behavior to make a useful 
(i.e., predictive enough to get rich) model of more and more complex 
patterns observed in the markets.

Steve