An evolutionary multi-objective optimization of trading rules in call markets
Li, X. and Krause, A., 2011. An evolutionary multi-objective optimization of trading rules in call markets. Intelligent Systems in Accounting, Finance and Management, 18 (1), pp. 1-14.
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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 and 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 algorithm seeking to maximize the trading volume and minimize the bid–ask spread. Our results suggest that markets should choose a small tick size if concerns about the bid–ask spread are dominating and a large tick size if maximizing trading volume is the main aim. We also find that unless concerns about trading volume dominate, time priority is the optimal priority rule.
|Creators||Li, X.and Krause, A.|
|Departments||School of Management|
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