[seminar] [DANAS] Sebastian Krause, 11.03. (srijeda) 14h (c.t.), Predavaona I krila IRB

[Kornelija Passek-Kumericki]

                       SEMINAR  TEORIJSKE  FIZIKE


   (Zajednički seminari Fizičkog odsjeka PMF-a te Zavoda za teorijsku
    fiziku i Zavoda za eksperimentalnu fiziku IRB-a)

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Connecting microscopic behavioral economics to macroscopic financial market 
models


Sebastian Krause
ZTF, IRB


   Datum:  srijeda, 11. ožujka 2015.
   Vrijeme: 14 sati c.t.
   Mjesto: IRB, predavaona I krila


Sazetak:

Time series of prices show the stylized facts of broadly distributed price 
jumps which occur clustered. This has serious implications for the accumulation 
of risk. Macroscopic price evolution models for estimating risk are commonly 
used. They extend the random walk by including auxiliary volatility variables 
to model time dependent volatility. On the other hand, agent based models that 
include behavioral insights are used to enlighten the mechanisms behind 
stylized facts. This could help to predict crashes and to improve market 
regulation.

After briefly illustrating this background, I discuss a way of interconnecting 
these two strands of research. Using an agent based model with herding, I 
exemplify a general recipe for finding macroscopic models numerically: A 
macroscopic variable which might control volatility is identified; The 
stochastic process ruling this volatility variable is measured, using the 
numeric evolution of the microscopic model. This procedure is suitable for 
models with puzzling emergent behavior, as well as for complicated models with 
many parameters. The resulting macroscopic price evolution model can be much 
simpler, allowing for proceeding investigations. Therefore, the field of agent 
based modeling profits from a macroscopic description. Another advantage is the 
microfoundation of macroscopic financial market models which are so far pure 
phenomenological. The auxiliary volatility variable can inherit a clear 
behavioral meaning from the microscopic model.

Voditeljica seminara: Kornelija Passek-Kumericki (passek at irb dot hr)
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