Construction of the Spread Dealer Model and its Application

Matsunaga, Kenta; Yamada, Kazuhiko; Takayasu, Hideki; Takayasu, Misako

doi:10.1527/tjsai.27.365

Cited by 4 publications

(6 citation statements)

References 17 publications

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“…In 2012, Matsunaga et al proposed the spread dealer model as a model capable of reproducing the unstable state of markets during events such as the Lehman Shock or FX interventions 36 . In the spread dealer model, when the volatility |∆P| is high, the spread of dealers widens.…”

Section: Spread Dealer Modelmentioning

confidence: 99%

“…For simplicity, it is assumed that the spread s i is the same for all dealers. By adding this effect, the correlation between the distance of the centers of gravity of the ask and bid and volatility observed in the real market can be well approximated 36 . The term (s(n)/s(0)) in Equation 6adjusts the noise term according to changes in the spread, aiming to keep the trend-following effect constant by adjusting the dealer's jump width to maintain a constant distribution of trading time intervals.…”

Section: Spread Dealer Modelmentioning

confidence: 99%

“…To simulate the unstable market conditions during interventions, the dealer model was enhanced as follows 36 . Since the entire order book widens during large price movements, the effect of the dealer's spread widening as volatility increases was introduced into the dealer model.…”

Section: Introductionmentioning

confidence: 99%

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Simulation study of foreign exchange market interventions using an extended dealer model

Arita,

Takayasu,

Takayasu

2024

Preprint

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This study analyzed yen-dollar exchange market price fluctuations and the shape of the order book observed in the foreign exchange (FX) market at the time of intervention by the Japanese government. Using the comprehensive data of the order book during the yen-sold (dollar-bought) intervention in 2011 and yen-bought (dollar-sold) intervention in 2022, we found that methods of intervention used by the Japanese government in 2011 and 2022 were quite different in the sense of strategy.Intervention in 2011 involved a strategy placing a large number of buy orders on a price absorbing a large number of market orders, while intervention in 2022 involved a strategy placing a large number of sell limit orders at a price lower than the best bid price. Next, simulations of market price movements during FX interventions were conducted by generalizing a model known as the spread dealer model.We introduced the concept of volume into this model and further modified and formulated the effects of stop-loss and take-profit, as well as modified the intervention effects, to simulate market price fluctuations during these interventions.We decomposed the time series into upward and downward trends, assuming that dealers have certain strategic parameters under each trend. Parameter search was performed by randomly selecting parameters within the search space.By searching for parameters that minimize the error function between the real time series and the simulated price time series, and optimizing dealer parameters under each trend, we obtained parameters for the dealer model that could replicate time series closer to real price fluctuation.The generalized dealer model developed in this study has the potential to be utilized in the future for estimating the number of interventions conducted and assessing the efficiency of interventions.

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Section: Spread Dealer Modelmentioning

confidence: 99%

Section: Spread Dealer Modelmentioning

confidence: 99%

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Simulation study of foreign exchange market interventions using an extended dealer model

Arita,

Takayasu,

Takayasu

2024

Preprint

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“…Further generalisation of the stochastic dealer model has enabled capturing the characteristics of an intervention by the Bank of Japan in the foreign exchange market between the US dollar and the Japanese yen [167]. Aside from ordinary dealers responsible for usual market-price fluctuations, the model also includes a special dealer that takes the role of the Bank of Japan.…”

Section: Agent-based Modelling: the Dealer Modelmentioning

confidence: 99%

Social physics

Jusup,

Holme,

Kanazawa

et al. 2021

Preprint

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Recent decades have seen a rise in the use of physics-inspired or physicslike methods in attempts to resolve diverse societal problems. Such a rise is driven both by physicists venturing outside of their traditional domain of interest, but also by scientists from other domains who wish to mimic the enormous success of physics throughout the 19 th and 20 th century. Here, we dub the physics-inspired and physics-like work on societal problems "social physics", and pay our respect to intellectual mavericks who nurtured the field to its maturity. We do so by comprehensively (but not exhaustively) reviewing the current state of the art. Starting with a set of topics that pertain to the modern way of living and factors that enable humankind's prosperous existence, we discuss urban development and traffic, the functioning of financial markets, cooperation as a basis for civilised life, the structure of (social) networks, and the integration of intelligent machines in such networks. We then shift focus to a set of topics that explore potential threats to humanity. These include criminal behaviour, massive migrations, contagions, environmental problems, and finally climate change. The coverage of each topic is ended with ideas for future progress. Based on the number of ideas laid out, but also on the fact that the field is already too big for an exhaustive review despite our best efforts, we are forced to conclude that the future for social physics is bright. Physicists tackling societal problems are no longer a curiosity, but rather a force to be reckoned with, yet for reckoning to be truly productive, it is necessary to build dialog and mutual understanding with social scientists, environmental scientists, philosophers, and more.

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“…An Ising model of agents' opinions (buy or sell) discusses influence of their private information and external news [10]. The dealer model describes the strategies of individual traders [11][12][13][14][15][16]. The dealer model is consistent with several emprical laws.…”

Section: Introductionmentioning

confidence: 98%

A Dealer Model of Foreign Exchange Market with Finite Assets

Hamano¹,

Kanazawa²,

Takayasu³

et al. 2017

Proceedings of the Asia-Pacific Econophysics Conference 2016 — Big Data Analysis and Modeling Toward Super Smart Society — (APE

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An agent-based model is introduced to study the finite-asset effect in foreign exchange markets. We find that the transacted price asymptotically approaches an equilibrium price, which is determined by the monetary balance between the pair of currencies. We phenomenologically derive a formula to estimate the equilibrium price, and we model its relaxation dynamics around the equilibrium price on the basis of a Langevin-like equation.

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Construction of the Spread Dealer Model and its Application

Cited by 4 publications

References 17 publications

Simulation study of foreign exchange market interventions using an extended dealer model

Simulation study of foreign exchange market interventions using an extended dealer model

Social physics

A Dealer Model of Foreign Exchange Market with Finite Assets

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