Inferring the Composition of a Trader Population in a Financial Market
Source: University of Oxford
There has been an explosion in the number of models proposed for understanding and interpreting the dynamics of financial markets. Broadly speaking, all such models can be classified into two categories: Models which characterize the macroscopic dynamics of financial prices using time-series methods, and models which mimic the microscopic behavior of the trader population in order to capture the general macroscopic behavior of prices. Recently, many econophysicists have trended towards the latter by using multi-agent models of trader populations.