My research interests
My general area of interest is financial markets and asset price dynamics. More specifically I focus on two quite different approaches to gain an improved understanding of factors driving (stock) market prices: agent-based computational finance and network models of social interactions.
Agent-based Computational Finance
In agent-based models are characterized by the heterogeneity of decision-makers, i.e. each decision-maker bases his decisions on his individual preferences, information set or behavioral rule. In conventional economic theory a "representative" decision-maker is chosen and all individuals treated alike, neglecting any interactions between the individual decision-makers and the effects these can have on decisions and in the end on asset prices. The focus of my research is on the impact of trading rules (market microstructure) on the properties of asset prices using zero-intelligence traders, i.e. traders that use very simplistic decision-rules and do not learn. The resulting systems of traders are evaluated using computer simulations as usually analytical solutions cannot be obtained.
Network models of social interactions
Standard economic theory assumes that all interactions between individuals are conducted via the market mechanism, i.e. prices. It is obvious that people also interact with each other outside the market, e.g. they meet informally and exchange their views which in turn affects their trading behavior. Unlike the market interactions these social interactions are not such that everyone interacts with everyone else but that rather individuals only interact with a small number of carefully selected others. These social interactions can be modelled as a network of individuals. My research attempts to model these interactions and investigate the implications they have for the decisions of individuals and finally stock market prices.
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