Title :
Risk Analysis on Program Trading: An Agent-based Computational Finance Perspective
Author :
Xiong, Xiong ; Yuan, Hailiang ; Zhang, Wei ; Zhang, Yongjie
Author_Institution :
Coll. of Manage. & Econ., Tianjin Univ., Tianjin, China
Abstract :
Program Trading originates from combination trading technology in 70´s in America. It was popular but once it was considered as root of disaster. Nowadays, there are many divergences on program trading risk in international academic world. This essay is to analyze program trading on risk of stock market. The method adopts computational experiment to build artificial stock market under various experimental conditions. The research will consider two strategies: combination insurance strategy and arbitrage strategy to inspect stock index futures´ influences on artificial stock market. Through contrast experiments, it finds that program trading will cause abnormal fluctuation of stock market in short-term period but it will have slight impact on fluctuation of stock market in long-term period. On the whole, stock index futures reduce price fluctuation of spot market. Besides, the research finds that combination insurance strategy will increase short selling expectation in pessimistic market to accelerate market collapse when the market gives the same downside price expectation and the market should consider the influence of combination insurance strategy.
Keywords :
disasters; inspection; insurance data processing; multi-agent systems; pricing; risk analysis; stock markets; agent-based computational finance; arbitrage strategy; artificial stock market; combination insurance strategy; disaster; downside price expectation; international academic world; pessimistic market; program trading risk; spot market; stock index future influence inspection; stock market fluctuation; Finance; Fluctuations; Indexes; Insurance; Investments; Portfolios; Stock markets; Agent-based Computational Finance; MATLAB; Program Trading; Risk Analysis;
Conference_Titel :
Business Intelligence and Financial Engineering (BIFE), 2012 Fifth International Conference on
Conference_Location :
Lanzhou
Print_ISBN :
978-1-4673-2092-4
DOI :
10.1109/BIFE.2012.73