2381/29001
Marc De Kamps
Marc
De Kamps
Daniel Ladley
Daniel
Ladley
Aistis Simaitis
Aistis
Simaitis
Heterogeneous beliefs in over-the-counter markets
University of Leicester
2014
Social Sciences
Economics
Business & Economics
ECONOMICS
Over-the-counter
Boundedly rationality
Stability
Network
Heterogeneous agent model
ASSET PRICE DYNAMICS
COMPLEX NETWORKS
MODEL
CONTAGION
PERCOLATION
INFORMATION
BEHAVIOR
TRADERS
AGENTS
RULES
2014-07-28 12:56:47
Journal contribution
https://figshare.le.ac.uk/articles/journal_contribution/Heterogeneous_beliefs_in_over-the-counter_markets/10157048
The behavior and stability of over-the-counter markets is of central concern to regulators. Little is known, however, about how the structure of these markets determine their properties. In this paper we consider an over-the-counter market populated by boundedly rational heterogeneous traders in which the structure is represented by a network. Stability is found to decrease as the market becomes less well connected, however, the configuration of connections has a significant effect. The presence of hubs, such as those found in scale free networks increases stability and decreases volatility whilst small-world short-cut links have the opposite effect. Volatility in the fundamental value increases market volatility, however, volatility in the riskless asset returns has an ambiguous effect.