Numerical simulation of a diffusion type evolutionary stock market model

Chavanasporn, W. and Ewald, C.-O. (2008) Numerical simulation of a diffusion type evolutionary stock market model. Applied Mathematical Sciences, 2(47), pp. 2323-2339.

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We adapt the evolutionary stock market model from Evstigneev, Hens, Schenk-Hopp´e (2006) to a continuous time framework, where uncer- tainty in dividends is produced by a single Wiener process. The setup is therefore significantly different from Yang and Ewald (2008), who also study continuous time, but remain within the framework of random dynamical systems of non-diffusive type. For the case of fix-mix strate- gies we derive the stochastic differential equation which determines the evolution of the wealth processes of the various market players. These stochastic differential equations are highly non-linear and we find that it is impossible to solve them analytically. Instead we simulate the wealth dynamic for various initial setups of the market. A detailed discussion of our observations from the simulations is given.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Ewald, Professor Christian
Authors: Chavanasporn, W., and Ewald, C.-O.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Applied Mathematical Sciences

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