Abstract
We evaluate an agent-based model featuring near-zero-intelligence traders operating in a call market with a wide range of trading rules governing the determination of prices, which orders are executed as well as a range of parameters regarding market intervention by market makers and the presence of informed traders. We optimize these trading rules using a multi-objective population-based incremental learning (PIBL) algorithm seeking to maximize the trading price and minimize the bid-ask spread. Our results suggest that markets should choose a relatively large tick size unless concerns about either the bid-ask spread or the trading price are dominating. We also find that in contrast to trading rules in actual markets, reverse time priority is an optimal priority rule.
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Li, X., Krause, A. (2010). An Evolutionary Multi-objective Optimization of Market Structures Using PBIL. In: Fyfe, C., Tino, P., Charles, D., Garcia-Osorio, C., Yin, H. (eds) Intelligent Data Engineering and Automated Learning – IDEAL 2010. IDEAL 2010. Lecture Notes in Computer Science, vol 6283. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-15381-5_10
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DOI: https://doi.org/10.1007/978-3-642-15381-5_10
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