Abstract
Stock exchanges are modeled as nonlinear closed-loop systems where the plant dynamics is defined by known stock market regulations and the actions of agents are based on their beliefs and behavior. The decision of the agents may contain a random element, thus we get a nonlinear stochastic feedback system. The market is in equilibrium when the actions of the agents reinforce their beliefs on the price dynamics. Assuming that linear predictors are used for prediction of the price process, a stochastic approximation procedure for finding market equilibrium is described. The proposed procedure is analyzed using the theory of Benveniste et al. (Adaptive algorithms and stochastic approximations. Springer, Berlin, 1990). A simulation result is also presented.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
