An agent based model of the E-Mini S&P 500 applied to flash crash analysis

Mark Paddrik, Roy Hayes, Andrew Todd, Steve Yang, Peter Beling, William Scherer

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

32 Scopus citations

Abstract

We propose a zero-intelligence agent-based model of the E-Mini S&P 500 futures market, which allows for a close examination of the market microstructure. Several classes of agents are characterized by their order speed and order placement within the limit order book. These agents' orders populate the simulated market in a way consistent with real world participation rates. By modeling separate trading classes the simulation is able to capture interactions between classes, which are essential to recreating market phenomenon. The simulated market is validated against empirically observed characteristics of price returns and volatility. We therefore conclude that our agent based simulation model can accurately capture the key characteristics of the nearest months E-Mini S&P 500 futures market. Additionally, to illustrate the applicability of the simulation, experiments were run, which confirm the leading hypothesis for the cause of the May 6th 2010 Flash Crash.

Original languageEnglish
Title of host publication2012 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2012 - Proceedings
Pages257-264
Number of pages8
DOIs
StatePublished - 2012
Event2012 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2012 - New York City, NY, United States
Duration: 29 Mar 201230 Mar 2012

Publication series

Name2012 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2012 - Proceedings

Conference

Conference2012 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2012
Country/TerritoryUnited States
CityNew York City, NY
Period29/03/1230/03/12

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