Speaker: Muruhan Rathinam, Mathematics, UMBC
Title: Modeling trader behavior and its effect on stock price dynamics
In the modeling of stock markets it has been common practice to model the
stock price process from a phenomenological point of view and traders are
assumed not to influence this process. In this talk we present a first
principles framework that models the interaction between trader behavior
and the stock price dynamics. Our model starts with a continuous time
discrete event description and under suitable scaling a coupled system of
stochastic differential equations are derived. In addition to extraneous
traders, we consider traders with three different types of trading
value, momentum, and hedge traders. We show via analysis and numerical
simulations that this simple model can explain some of the stylized features
of the stock market such as stochastic volatility, volatility clustering,
as well as the stock pinning phenomenon.
This is joint work with James A. Primbs at Stanford.
Time: Friday, Oct. 2, 2009, 1:30-2:30 p.m.
Place: Science and Tech I, Room 242
Department of Mathematical Sciences
George Mason University
4400 University Drive, MS 3F2
Fairfax, VA 22030-4444
Tel. 703-993-1460, Fax. 703-993-1491