Multi-Agent Modelling of Trader Psychology: Mathematical Modelling of a closed Financial Market

by Sanchit Gupta

Often, situations arise where the assumptions of ‘perfect’ conditions do not hold. In these situations, a bottom-up approach is more useful, rather than the other way round. Hence, Agent-based modelling is quite an attractive approach to model highly complex and unpredictable elements, such as psychology and behaviour, in financial systems. The recent recession has urged economists and researchers to find new and more open techniques, whereby models are broken down into their constituents, and each constituent is modelled separately, allowing the users of the model to alter the model’s applicability by changing the appropriate parameters, making these models very versatile. The model developed during this work has been labelled NABM and has been applied to Barclays stock which is traded on the FTSE 100 stock exchange. The NABM allows its user to study traders’ behaviour under different market circumstances. The NABM also models the stock price itself, which is influenced by a variety of factors. MATLAB has been used for all modelling and data analysis purposes.

72 pages, Paperback

Published August 29, 2011

About the author

Born and brought up in the hills of Himachal Pradesh, Sanchit began his career as a part-time copywriter. He went on to co-found his own theatre group, worked as a freelance film screenwriter and as executive producer–fiction for a leading television network. His short stories have been published in several publications and lit festivals, viz Muse India, Indian Ruminations, Contemporary Literary Review India and Tata Lit Live to name a few. He has worked with All India Radio as a talk show host and regularly features in poetry recitals at Prithvi Café, Mumbai. This is his debut novel, the screenplay based on which has been long-listed in Sundance screenwriters’ International lab- US.

When not writing, he is usually hanging out with his wife or looking for people to play poker with. He says his works explore his fascination for global cultures, societal structures, vagaries of the world and the human mind, but you know that's all blah.